UK stock markets rose in Q2, outperforming Eurozone but trailing the US market's growth

From Morningstar: 2025-07-01 05:06:00

In the second quarter, UK stock markets rose, hitting record highs despite global triggers like US tariffs and the Middle East conflict. Industrial and financial stocks led the gains, with Rolls-Royce contributing significantly. UK banks continued their strong performance, with Barclays up 17% in Q2. The Bank of England cut interest rates to 4.25% but may delay further cuts due to high inflation concerns.

UK stock markets outperformed the Eurozone but trailed behind the US market, which rose 10.7%. The weakening dollar flattered the US market gains, while tech stocks surged in late June. UK banking stocks, including NatWest and Lloyds Banking Group, contributed to the UK index’s growth. Gilt yields fell, reflecting lower risk perception and increased confidence in UK government finances.

The pound strengthened against the dollar, hitting a high of $1.37 in Q2. Trade tariffs and a weaker dollar boosted the pound, benefiting UK tourists but potentially limiting investment returns. Market participants expect further interest rate cuts by the Bank of England, with inflation forecasted to rise above target levels. Bond prices rose as yields fell, signaling increased confidence in UK debt.



Read more at Morningstar: 5 Charts on UK Markets in Q2