Here we go again

The UK bond market rallied slightly at the end of last week, despite facing the twin threats of the ongoing impact of the Iran conflict and the potential for a leadership challenge against Mr Starmer in the coming weeks. Yields at the longer end fell on Friday as Mr Starmer was defiant that he would not leave office, and sterling remains very resilient, suggesting the market believes he will hang on at least for now. Gordon Browns reintroduction to government is an interesting move.

Stocks in the US continue to power higher, partly because analysts’ corporate earnings expectations are being revised higher and partly because AI demand for semiconductor chips is driving that sector to new highs. The concentration of the Mag 7 within the S&P 500 is at an all-time high again, making life very hard for fund managers running balanced portfolios.

Last week’s US employment data was pretty good; the unemployment rate remained at 4.3%. Non-farm payrolls for April, the second month of the war with Iran, were pretty solid. If last week’s jobs data is anything to go by, there is no imminent suggestion that the US economy is doing anything but reasonably well.

The trip by Mr Trump to Beijing will go ahead this week, apparently he’ll become the first sitting US president to visit China in nearly a decade. It is also worth noting that Joe Biden never visited China to meet Xi, whereas Trump has met with Xi at least 6 times over the past decade. This would suggest that despite disagreements over trade, Taiwan and technology, the two have a mutual respect.

What else will stock markets be focusing on this week, aside from the ongoing conflict in the Middle East, as earnings season comes to a conclusion? Inflation reports are likely to make headlines, as expectations have been rising over the past few weeks amid higher energy prices. This coming week, we get the US consumer and producer inflation rates, along with retail sales and industrial production. The April headline inflation rate is expected to accelerate to 3.4% year over year. Also this week, the Fed chair baton is being handed over as the US Senate is set to vote on May 11 to invoke cloture on the nomination of Kevin Warsh as the 17th Chair of the Federal Reserve.

As far as the UK goes, aside from all the potential political headlines, will or won’t the starting gun be started on a challenge to Mr Starmer’s leadership? We get the Q1 GDP estimate. Forecasts are for the British economy to expand 0.6% in Q1, marking the strongest quarterly growth in a year.