The latest economic news and market highlights from the UK and abroad.
This week's headlines:
- New PM in charge – Andy Burnham has moved into No.10 and has already announced a wave of policy changes, alongside a new cabinet with John Healey as Chancellor. Measures include scrapping VAT from electricity bills, capping bus fares at £2 across England, and cutting business rates for pubs and music venues in England.
- Inflation eases – UK inflation fell to 2.6% in the year to June, down from 2.8% in May. This was largely due to lower fuel, food and clothing prices, helped by intense competition between supermarkets. Sugar and confectionery saw the biggest price drops for food items.
- Oil prices rise to $100 – Brent Crude hit $100 a barrel for the first time since May, as tensions around the Strait of Hormuz intensify. Prices spiked on Thursday after Houthi militia in Yemen attacked tankers in the Red Sea, threatening a key Saudi export route.
- Trump's tariff revival – US President Trump has imposed a fresh round of tariffs on more than 80 countries to replace a 10% global duty that was due to expire. The tariffs are based on claims key trading partners have failed to properly tackle forced labour. Most affected countries will now face a 12.5% tariff, the UK has a lower rate of 10% and previous exemptions remain in place.
- Big tech earnings worry investors – Alphabet and Tesla shares fell this week after their results gave investors concern over their capital expenditure. Alphabet unveiled higher spending plans, while Tesla reported negative Q2 cashflow for the first time in more than two years.
What this means for financial advisers and clients
Burnham and borrowing
Government borrowing matters because it can influence gilt yields. Higher yields can increase borrowing costs across the economy and affect the value of government bonds held within investment portfolios.
Public borrowing fell in June by £7.9bn from a year before, which gives a bit of breathing room to Burnham and Healey, but not much. The Office of National Statistics (ONS) says debt remains high by historical standards and is close to the annual value of the UK’s economy.
Burnham announced that he’d be sticking to the fiscal rules on borrowing, though he’ll look to use “any flexibility” within them - those words sent 10-year gilt yields above 5%, clearly showing how closely markets are scrutinising the detail of what’s being promised, and how it’s paid for.
If more borrowing is off the cards, taxes might be on the agenda. Burnham’s promised to stick to the 2024 manifesto pledge not to raise income tax, VAT or National Insurance, but that means other taxes could still be changed to raise revenues.
Inflation in the nation
Although inflation eased to 2.6%, it remains above the Bank of England's (BOE) 2% target, so an interest rate move next week still looks unlikely. The BoE will want to see what impact Burnham and Healey’s new measures will have before taking action.
Hey big AI spender
Alphabet and Tesla's earnings this week put the AI spending debate front and centre. Companies are investing heavily in the technology, but investors are questioning how much is too much and whether future profits can support such ambitious expenditure. With more companies reporting earnings next week, it will be interesting to see if the trend continues.
Chart of the week
Source: Institute for Government. * assumes Starmer leaves office at the start of summer recess, 16 July 2026, Guardian.
Why’s this worth sharing?
Why’s this worth sharing? A new Prime Minister, a new cabinet. There’s a lot of change right now, and a lot of talk around tax and new policies.
Periods like this often worry people into action around their investments. It’s tempting to reduce UK exposure, hold more cash or put off decisions until things become clearer. While that can seem like the sensible option, history suggests it often isn’t.
As the above chart shows, the term of a Prime Minister these days is quite short – certainly shorter than most long-term investment plans. A 10-year gilt maturing this week would have been issued under Theresa May’s tenure, outlasting five Prime Ministers. Larry the cat, Chief Mouser to the Cabinet Office, has seen off six PMs since arriving in 2011.
The big picture matters. Politics can influence the markets and the economy, particularly over the short-term, but it shouldn’t drive long-term investment decisions - which have historically been driven far more by economic growth, company earnings and the power of compounding, rather than changes in political leadership.
The Markets
UK: UK equities edged higher as investors reacted positively to Andy Burnham's appointment as Prime Minister and early policy announcements. Meanwhile, gilt yields rose above 5% as markets assessed the prospect of higher government borrowing.
US: US markets finished slightly higher, but gains faded after Alphabet and Tesla's earnings disappointed investors. Concerns centred on AI spending and fears over future profitability.
Europe ex UK: European markets were broadly flat as strength in energy stocks was offset by concerns over higher oil prices and the economic outlook.
Japan: Japanese equities were among the week's strongest global performers, benefiting from renewed risk appetite and strong demand across technology and semiconductor-related names. Investors largely brushed off global tech valuation concerns and the woes of the US hyperscalers, returning to Japanese export-heavy large caps as regional momentum built.
Asia Pacific ex Japan: The region posted the strongest gains of the week, driven by technology stocks and resilient manufacturing activity.
| Name | Weekly change | YTD change |
|---|---|---|
| FTSE Actuaries UK Conventional Gilts All Stocks | -1.00% | -1.97% |
| IA Global High Yield Bond | -0.51% | -0.35% |
| ICE BofA Global High Yield | 0.21% | 2.16% |
| FTSE All Share | 0.36% | 8.93% |
| FTSE USA | 0.24% | 9.57% |
| FTSE World Europe ex UK | -0.08% | 8.10% |
| FTSE Japan | 3.63% | 16.03% |
| FTSE Asia Pacific ex Japan | 3.94% | 20.69% |
| FTSE Emerging | 3.29% | 10.22% |
Source: Morningstar. GBP returns as at close of business on Thursday 23 July 2026.
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