The page you were trying to view is not available for your role and region.
Weekly podcast – Market overview
This week, Investment Manager Fraser Wilkinson is joined by Richard Carter, CFA, Head of Fixed Interest Research, to explore the latest movements in global markets and key sector developments. They discuss the relationship between inflation and global commodities, whether interest rates could continue to rise, and how investment managers may be thinking about portfolio positioning. The conversation also touches on a hypothetical question: what would happen if a country refused to pay its national debt?
Important information - This is a marketing communication provided for information purposes only and does not constitute independent investment research, investment advice or a personal recommendation.
Market overview
With US stock markets picking up where they left off the previous week (setting yet more all-time highs), and with the Middle East conflict showing no signs of being resolved or the Strait of Hormuz, a vital oil and gas transit route, reopening, the latest edition of the Weekly Comment was in danger of sounding remarkably similar to recent missives: 'Stock markets rise despite Middle East conflict!’ Then came Wes Streeting.
A phoney contest
The now former health secretary’s resignation from Sir Keir Starmer’s cabinet appears to have triggered the leadership contest that has hung over UK government bond markets in recent months. Finally, an end in sight to the political uncertainty? Sadly not. For a leadership contest is not officially underway. Instead, we have a phoney one in which the rival candidates are stating their cases in anticipation of one being called at some point. On the face of it, not much has changed then.
But it has. That’s because one would-be candidate in any contest, Manchester Mayor Andy Burnham, he of the government should not be in ‘hock to bond markets’ fame, announced he is putting himself forward as Labour’s candidate for the Makerfield by-election. If Burnham wins, he will likely stand against Starmer in a leadership contest. He will not be the only one. Wes Streeting has indicated he will enter the race. Former deputy leader Angela Rayner hasn’t ruled out doing the same, particularly as she has now settled her tax bill with HMRC.
By-elections take time as do Labour leadership contests, prompting the Financial Times to suggest that it might not be until the end of September before a new Labour leader and Prime Minister is in place. End of September! While London’s large cap stocks have held up well and remain in positive territory for the year thanks to their international tilt, gilts and sterling, both already under pressure over concerns Starmer might be replaced by a more fiscally loose leader, face months of political instability. Uncertainty over Starmer’s premiership is not going away anytime soon.
Spare a thought for Kevin Warsh
The same can be said about the global inflationary shock unleashed by the Middle East conflict. Concerns over inflation have been around for a while but they are now showing up in the numbers. The US consumer price index (CPI) jumped 0.6% month-on-month in April, after rising 0.9% in March. On a year-on-year basis, prices are up 3.8%. Strip out energy and food and core CPI was up 0.4% in April and 2.8% on the year compared to expectations of 0.3% and 2.7% respectively. Forward-looking data are pointing to further CPI rises to come. The producer price index (PPI) clocked up its largest monthly increase since March 2022 after rising 1.4% in April. Over 12 months, the PPI is up 6.0%.
April’s inflation numbers prompted Chicago Fed President Austan Goolsbee to declare the US has an “inflation problem”. If the US has an inflation problem, then it is now Kevin Warsh’s after the Senate confirmed his appointment as Federal Reserve Chair. Sustained higher inflation will make it harder for Warsh to deliver the interest rates cuts US President Trump so craves. So, the question is, if rate cuts aren’t forthcoming, how long will it be before the President starts calling Warsh a ‘numbskull’ or ‘moron’— names he regularly hurled at outgoing Chair Jay Powell for not cutting rates hard or fast enough? Remember who appointed Powell back in 2017? None other than Trump himself. Who’d be a US central banker?
Weekly market moves:
The MSCI All Country World Index (MSCI ACWI) ended the week down 0.5%. Year-to-date (YTD), the index is up 1%.
United States:
Once again, US stocks outperformed their global peers. A modest 0.2% rise (+8.7%YTD) means the main US stock market has posted gains in each of the last seven weeks. As with previous weeks, the tech sector led the charge buoyed by continued appetite for the artificial intelligence (AI) trade. No surprise then that large-cap growth stocks (+0.7) beat all-comers—value was down -0.8%; small caps -2.3%. It wasn’t that long ago when value and small caps were the market leaders and growth stocks the laggards. This can still be seen in the YTD numbers. Despite recent gains, growth stocks are up 5.3% YTD, less than half value’s +10.8% and small caps’ +13.1%.
US equities may be in positive territory for the year, but the same cannot be said for government bonds. Here inflation concerns sparked by the Middle East conflict have been most keenly felt. With April’s US inflation numbers coming in stronger than expected, US Treasuries were always going to struggle: the yield on 10-year Treasuries jumped 23 basis points to 4.59% (up 43 basis points YTD); similarly, the 2-year Treasury yield rose 18 basis points to 4.07% (up 60 basis points YTD).
United Kingdom:
In a week in which domestic politics dominated, it would have been a reasonable shout to expect UK stocks to be among the week’s laggards. In the event, London’s large caps outperformed the global index, ending the week 0.2% lower (+4.2% YTD). The more domestically focused mid-caps fared worse, falling 1.0% (+1.9% YTD). The political uncertainty weighed on sterling which dropped to US$1.33 compared to US$1.36 previously.
Similarly, the yield on the 10-year UK gilt increased 26 basis points to 5.17% (up 70 basis points YTD). News that the UK economy grew 0.6% in Q1, three times the 0.2% growth recorded during the final three months of 2025, wouldn’t have helped. Stronger growth reinforces expectations that the Bank of England will raise rates to tackle inflation.
Europe ex UK:
The MSCI Europe ex-UK Index finished the week 0.5% lower (+3.6% YTD). Although this matches the global benchmark, there was wide divergence at the national level with Germany’s main stock market down 1.6% (-2.2% YTD); France 1.5% lower (-0.8% YTD); Italy off 0.4% (+10.4% YTD); and Switzerland up 1.0% (2.4% YTD). The euro ended the week at US$1.16, down from US$1.18 previously. Mirroring global bond markets, the 10-year German Bund yield climbed 17 basis points to 3.17% (up 31 basis points YTD).
Important information
This material is a marketing communication provided for information purposes only and does not constitute independent investment research. References to financial instruments are for general information purposes and are not subject to requirements applicable to independent investment research.
Any references to securities or financial instruments should not be regarded as a personal recommendation, or as an offer, solicitation or invitation to buy or sell any financial instruments. The views expressed are those of the authors at the time of publication and are subject to change. Past performance is not a reliable indicator of future results.
This material does not constitute tax, legal or accounting advice. You should seek independent professional advice appropriate to your individual circumstances before making any financial decision or engaging in any transaction.
Author
Fraser Wilkinson
Executive Director
Richard Carter
Head of Fixed Interest ResearchTo listen to all the past Weekly Comment podcasts click here or subscribe via the apps below:
