A busy week ahead, earnings and inflation the focus and the semi final

So far, the bond and currency markets have taken the news of the changing of the guard at No10 positively. Both sterling, gilts and stocks rallied on Friday. What was possibly more noteworthy was the outperformance of the more domestically economically sensitive FTSE 250 over, the more diversified FTSE 100. According to the weekend FT, investors see Labour landslide win as set to enhance the attractiveness of the UK markets as the prospect of political stability marks the country out from some of its neighbours. For that, one assumes read France for now as the attempts to keep out the far-right Le Pen resulted in a victory for the far left. The Labour Party may have had a large seat majority in the House of Parliament, but this was not won by a ringing endorsement by the population due to the vagaries of our polling system. Only 60% of the country turned out, and Mr Starmer’s party only received 34% of the vote that did turn up. Mr Starmer and Ms Reeves will also have the luxury in the early days at least of blaming all their unpopular decisions as a result of what they inherited from the Conservatives.

It may be the summer months, and schools have broken up, so summer holidays are on the horizon, but markets rarely take any time off. Jerome Powell testifies to lawmakers for two days this week as he delivers his semi-annual Monetary Policy Report to Congress. He’ll start on Tuesday before the Senate Committee on Banking and move to the House Financial Services Committee on Wednesday. On Thursday, the Bureau of Labor Statistics publishes the consumer price index for June. The consensus estimate calls for a 0.1% increase during the month after the index was unchanged in May. At the end of the week,  Friday’s employment reported that non-farm payrolls beat forecasts. However, the unemployment rate rose to a two-and-a-half-year high, and wage growth fell to a three-year low. Further signs that the US economy continues to slow.

This week’s earnings season starts in the US with Pepsi on Wednesday, then a series of the big banks on Friday, in which we always get Mr Dimon’s take on current events and the outlook. The UK will be dominated, in the short term, by what comes from not only No10 but No11 as well. On Thursday, we get a raft of UK economic data, including industrial and manufacturing production, construction output, and GDP year over year. Markets around Europe look like they are opening slightly weaker after weakness in Asia. Of course the other main event this week will be the semi final of the European Championships, as we play the Dutch on Wednesday at 8pm.