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The Davy Digest - 7th July 2025

07th July, 2025

The S&P 500 and Nasdaq hit all-time highs last week following a stronger-than-expected US jobs report released on Thursday. President Trump’s “big, beautiful bill” was passed by the US Senate and House of Representatives which is expected to add $3.4trn to the US deficit over the next decade. ISM Manufacturing and Services PMI also came in better than expected, while unemployment remains muted. In the Eurozone, inflation increased slightly to 2%, meeting the ECB’s target, while inflation in Germany also fell in line with targets in June. Elsewhere, UK government bonds rebounded on Thursday after PM Keir Starmer affirmed that Rachel Reeves would remain chancellor for a “very long time to come” and backed fiscal rules. This reassurance followed a sharp sell-off in gilts and the pound on Wednesday, after Starmer failed to support Reeves in the House of Commons. Lastly in China, both NBS and Caixin Manufacturing PMIs improved since May while the Caixin Services PMI was less than expected.

Looking forward to this week, the minutes of the Federal Open Market Committee will be released on Wednesday, having held rates steady at its last meeting. Elsewhere, investors will see retail sales figures for the Eurozone and the UK. China’s inflation figure for June will also be released, having fallen by 0.1% year-on-year in May.

Chart of the moment

Getting off defence

Source: NATO, Davy as of 04/07/2025. Figures are 2024 estimates.

 

  • At the 2025 NATO Summit in The Hague, NATO members committed to spending 5% of GDP annually on defence by 2035, a significant hike from the previous 2% target.
  • Of the 5% figure, 3.5% will go towards core defence spending on troops and weapons, while the remaining 1.5% can be allocated towards "defence-related expenditure”.
  • All NATO members have backed the 5% target, although Spain stated it can fulfil its obligations without reaching the spending goal.

Warning: The information in this article is not a recommendation or investment research. It does not purport to be financial advice and does not take into account the investment objectives, knowledge and experience or financial situation of any particular person. There is no guarantee that by putting a financial or investment plan in place, you will meet your objectives. You should speak to your adviser, in the context of your own personal circumstances, prior to making any financial or investment decision. 

Warning: Forecasts are not a reliable indicator of future performance.

Warning: Past performance is not a reliable guide to future performance. The value of your investment may go down as well as up.