Weekly Comment: Andy Burnham and the ho(c)key cokey song

Market overview

The on-off conflict in the Middle East was very much in on-mode during the week ended Friday 24 July 2026. Cue Brent crude breaching the US$100 barrier once again, government bond yields rising and global equities losing ground. But come the weekend, the switch had been flicked back to off after US President Donald Trump’s Administration announced a pause in hostilities to give “the talks some space.” We’ve been here before.

Pick and mix?

Take your pick as to what might have triggered the break in the tit-for-tat strikes: 10-year Treasury yields ending the week at 4.68%, a level around which previous changes of heart by Trump, aka the TACO trade (Trump Always Chickens Out), have been seen; US petrol prices back above the US$4 per gallon level, an unwelcome squeeze on the US consumer; the countdown to the US mid-term elections breaching the 100-day mark, opinion polls are suggesting Trump’s Republican Party could lose control of the House of Representatives; or increased expectations that interest rates will likely be raised, possibly as early as this week’s Federal Reserve (Fed) rate-setting meeting.  All of the above perhaps? Or is the reason simply a case of the US having to manage its rapidly diminishing stockpile of arms?

Moving the dial in increments?

Regardless of the reason, new UK Prime Minister Andy Burnham will be hoping the latest talks between the US and Iran lead to a long-lasting peace. Last week’s spike in oil prices and, should it last, the implications this could have for future UK inflation threaten to more than offset recent good news for UK consumers. The latter coming from the daily helping of initiatives Burnham dished out during his first week in 10 Downing Street (London) and No. 10 North (Manchester). That said the reduction in VAT on electricity bills which promises to save consumers up to £45 per year and the £2 bus fare cap were arguably less about moving the dial and more about signalling that Burnham is tackling the cost-of-living crisis.

Signal, left, manoeuvre?

Speaking of signalling, all eyes were on Burnham’s first cabinet picks for any hints on his government’s future direction of travel. Would there be a sharp turn to the left or would the appointments signal a centrist course or even a gentle bearing to the right?  In the event, there was a generous dollop of leftish appointments, a sprinkling of right-of-centre names (take a bow new defence minister Wes Streeting) and finally a surprise ingredient after former defence minister John Healey was appointed chancellor. So, there you have it, Burnham’s first cabinet. Not that the gilt market was too fussed—the yield on the 10-year gilt barely budged from the 5% plus level it has been trading at.

The ho(c)key cokey song

The non-event that was the unveiling of Burnham’s cabinet should not have come as a surprise. After all, global rather than domestic factors typically have more heft when it comes to setting the tone for gilt markets. All eyes then are directed back to those ongoing talks on the Middle East conflict and this week’s Fed rate meeting. As Greater Manchester Mayor, Burnham talked about moving “beyond this thing of being in hock to the bond markets”. But as prime minister he may well find out “That (bond markets are) what it's all about. Woah-oh, the ho(c)key cokey!”

Weekly market moves:

The MSCI All Country World Index (MSCI ACWI) ended the week 0.3% lower, bringing the year-to-date (YTD) gain down to 10.1%.

United States:

A 0.6% fall meant the main US stock index (+9.0% YTD) underperformed global equities. Rising oil weighed on sentiment. So too, did artificial intelligence (AI) stocks after Alphabet and Tesla’s Q2 results were given a lukewarm reception at best. In the case of Alphabet, the market appeared to look beyond the strong revenue growth, choosing instead to focus on yet another bump up in planned spending on AI infrastructure. In all, the owner of Google now expects to spend up to US$205bn in 2026. Not what the market would have wanted to hear when concerns over Big Tech’s spending have been building for some time.

As for the Q2 earnings season so far, as of Friday 24 July, 27% of companies in the main US benchmark had reported. 86% of these had posted positive earnings (EPS) surprises and 80% revenue beats, according to FactSet. Quarterly report card: still early days but a good start.

With higher oil prices stoking speculation that the Fed may hike rates this week, large-cap growth stocks were on the backfoot, shedding 1.5% (-0.3% YTD). This meant they underperformed value which ended the week up 0.1% (+19.0% YTD). Small caps followed the lead of large-cap growth, falling 1.1% (+18.9% YTD). As did US Treasuries. The yield on the 10-year Treasury note rose 13 basis points to 4.68% (up 51 basis points YTD). The 2-year Treasury yield increased 15 basis points to 4.33% (up 86 basis points YTD).

United Kingdom:

The UK market’s structural dynamic of overweight energy / underweight tech helped the large-cap index generate a 1.3% gain for the week (+10.1% YTD). Mid-caps also tacked on 0.9% (+8.0% YTD). That’s the second week in a row that UK equities have posted positive returns while the global benchmark has been in the red. The UK showing off its diversification qualities? Sterling didn’t fare so well, ending the week at US$1.33 compared to US$1.35 previously. Similarly, the yield on the 10-year gilt closed up eight basis points to 5.03% (up 56 basis points YTD).

Europe ex UK:

Like the UK, European stocks outperformed —the MSCI Europe ex-UK Index ended the week up 0.3% (+10.5% YTD). An impressive outcome given markets had to deal not only with the escalation in the Middle East conflict but also the imposition of another round of US tariffs. Working in Europe’s favour, a good batch of quarterly earnings reports and the European Central Bank (ECB) leaving its key interest rates unchanged at its latest meeting, although comments from ECB President Christine Lagarde suggest a rate rise could be on the cards in September.

At the national level, Germany’s main stock index gained 1.1% (+2.5% YTD); France’s 0.4% (+5.4% YTD); and Italy’s 0.1% (+18.8% YTD). Switzerland was the outlier, courtesy of a 0.1% fall (+11.2% YTD). The yield on the 10-year German bund couldn’t buck the global trend, rising five basis points to 3.17% (up 32 basis points YTD). Finally, for the third successive week, the euro was unmoved against the US dollar at US$1.14. The euro, a beacon of stability (for now) in what remains a volatile trading backdrop.

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