Weekly Espresso

Last week’s CPI release by the Bureau of Labor Statistics showed annual US inflation cooled to 3.4% taking some pressure off the Federal Reserve to raise interest rates. The odds of a rate hike at the next meeting in September have fallen to 42%.

On Wednesday, the Treasury Department reported that the US budget deficit soared to its highest monthly level in more than five years…

US markets bounced back last week, with their leading tech index up nearly 5% – its best week since April.

Optimism around the potential reopening of the Strait of Hormuz boosted markets in general. An array of strong quarterly earnings reports bought back some confidence in potential big tech profit growth. The highlight being a 93% quarterly revenue increase at Palantir which saw the stock surge 29.5% at the beginning of the week.

However, not everyone is convinced…

Following a 9-3 vote, the Federal Reserve held interest rates for the fifth time in a row on Wednesday.

With prices rising well above the Fed’s 2% inflation target, and the ongoing situation in Iran constantly muddying the inflation picture, the Fed has been coming under increasing pressure to raise rates.

During a tough press conference, Fed Chair Kevin Warsh’s responded to questions over why the Fed didn’t hike rates saying, “we will deliver, we are focused like a laser on making sure we can do it, but the suggestion we are going to wave a magic wand is one I want to disabuse you and everyone else of.” Bond markets reacted badly to the news sending 30-year US treasury yields past 5.2% and their highest level in two decades…

New Prime Minister Andy Burnham received some positive economic data in his first week as PM. 10-year gilt yields eased to 5.07% on the back of news that retail sales rose 1% in June, beating expectations of a 0.3% decline. The World Cup and consistent sunshine helped contribute to the extra spending. Consumer confidence is now at a six-month high too. PMI data also showed UK business activity has returned to growth.

Counter to press expectations, Andy Burnham named John Healey as Chancellor. Healey resigned as Defence Secretary just six weeks ago in a row over military spending. UK defence stocks like Babcock and BAE surged on the news and the likelihood that Healey will increase defence spending from 2.7% to 3%…

The price of brent crude oil surpassed $90 a barrel again after another week of fighting in the Middle East. Last night, Iran’s Revolutionary Guard said “not a single drop” of oil or gas will get through the Strait of Hormuz if US attacks continue.

Vessels passing through the Strait dropped to just 13 last Wednesday and maritime traffic appears near another standstill…

Reform UK leader, Nigel Farage’s decision to resign and hold a by-election for his Clacton-on-Sea seat sent UK gilt yields up earlier in the week. With all major parties refusing to take part, Farage will now face Count Binface, members of Monster Raving Loony Party and the Human Fox on 13 August 2026. If re-elected, the Commons Parliamentary Commissioner for Standards, Daniel Greenberg, will finish his investigation into Farage’s undisclosed £5mn “gift” from cryptocurrency billionaire Christopher Harbone. If found guilty of breaking parliamentary rules by not disclosing the gift, Clacton will face another by election shortly after.

UK gilt yields fell on Friday after Andy Burnham’s nomination to be the Labour party leader and next PM, was backed by 322 out of 403 labour MPs…