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28 Jul 2026 | 3 minutes to read
(All equity data is MSCI; all data in sterling unless stated)
Andy Burnham completed an eventful first week in office, with investors still trying to comprehend the scale of future policy direction. The new prime minister has trailed the “biggest changes in the last 40 years”. But early announcements, whilst numerous, have been somewhat more piecemeal. Burnham has promised to sketch put his “10-year plan” later in the year, but any grand vision will inevitably collide with the reality of the UK’s fiscal constraints. Markets will quickly judge whether new Chancellor John Healey is considered market friendly. Healey presents an immediate fiscal challenge given he quit as Defence Secretary after predecessor, Rachel Reeves, failed to commit to spending fully 3% of GDP on defence - equivalent to a shortfall of around £10bn a year. Presumably, fixing this funding gap was a pre-condition of Healey accepting the job.
Burnham has suggested he will use "any flexibility" within UK fiscal rules. And a charm offensive began with Tuesday’s announcement of the removal of the 5% VAT rate on energy bills; followed by Wednesday’s declaration of capped bus fares in England; while Thursday brought news of business rates for pubs, social clubs and live music venues in England being cut by 20%. Where the fiscal flexibility for these concessions comes from, however, is currently less clear. The energy bill VAT cut is reportedly funded by scrapping digital ID plans, although some have claimed that programme was itself still unfunded. If costs mount on one side of the ledger tackling defence, homelessness, council house provision, and energy bills, etc., they’ll need to be offset on the other by cutting spending elsewhere or raising taxes.
The 10-year gilt yield rose above 5% last Monday, up from around 4.95%. It peaked at c.5.11%, the highest level since mid-May, before ending the week at 5.04%. There is likely a political risk-premium embedded in UK borrowing costs, but the impact since Burnham became the likely successor to Keir Starmer has hitherto been less significant than feared. Bond yields are generally higher globally, reflecting broader geopolitical tensions and inflation dynamics. The latest consumer prices index (CPI) measure of inflation brought some welcome news, dropping to 2.6% in the year to June, down from 2.8%. Although it’s likely only a temporary reprieve as far as headline inflation is concerned, with a rise in the energy price cap taking effect from 1 July.
For further information please see the Insight Focus article published last week - Burnham's first week | TrinityBridge - and look out for an upcoming Insight Talks Podcast.
The US has imposed tariffs on 60 major trading partners on the basis they don’t do enough to prevent forced labour, and potentially benefit from unfair trading practices. The tariffs effectively relace President Trump’s temporary 10% global levy, after the 150-day time limit expired on Friday. According to the Office of the US Trade Representative (USTR), countries that have taken mitigating steps will face a 10% tariff on most imports. Others will be hit with 12.5%.
The temporary 10% tariffs were imposed back in February, when the Trump administration started pursuing new ways to implement one of the President’s signature policies. The US Supreme Court struck down the use of the International Emergency Economic Powers Act (IEEPA) - the method through which the initial “Liberation Day” tariffs were implemented. The current attempt – which was first announced in June - invokes Section 301 of the 1974 Trade Act – likely to be a more durable legal framework. The countries affected account for around 99% of US imports. The UK, EU, Canada, Mexico and India are to be subject to the 10% rate, while China, Japan, South Korea, and Australia will suffer the higher 12.5% tariff.
It is understood that the new tariffs will not “stack” on top of existing import taxes in most cases. Several countries have negotiated specific concessions or agreements with Washington in the period since April 2025. The EU had recently ratified a broad trade agreement with the US. Yet, the bloc might now see many products benefitting from a lower 10% levy, rather than the 15% cap just agreed to. Although Trump cast further doubt over the weekend (see Other Insights section).
The US’s justification for the tariffs likely provides a firmer legal basis. And the stated aim could be a method through which global trade pressure on China is increased. Yet, Trump has made little secret of the fact that tariffs are also about addressing the US trade deficit and bolstering US manufacturing. Whatever the intentions, a protectionist trade policy is set to remain a structural feature of global commerce, with potential implications for inflation and corporate earnings.
The price of oil fell sharply on Monday this week, as the latest pause in US-Iranian military action raised hopes of conflict resolution. Having risen by around 30% since the start of July, oil declined sharply as the week commenced. At the time of writing, Brent crude, has pulled back c.8% to around $90 a barrel, having risen above $100 last week.
June’s Iran-war climbdown had seen the price of oil fall quickly back to pre-war levels of around $70 a barrel. But the collapse of the ceasefire further threatened global energy supplies. Last week, attacks by Iran-backed Houthi militia threatened shipping through the Bab-el-Mandeb Strait, another key route which some exporters had used to bypass the Strait of Hormuz. Globally, more than 60% of the world’s oil flows through the seven major maritime chokepoints. And with two of the most significant straits disrupted, some analysts had warned of oil prices rising to $120.
The latest deescalation has seen the US and Iran pause strikes for three nights in a row. With the US ambassador to the United Nations (UN) noting that President Trump was “giving talks some space”. The renewed confrontation had seen the spectre of interest rate hikes reemerge, as the threat of elevated inflationary pressures reasserted. The European Central Bank (ECB) opted to raise interest rates in June for the first time in almost three years – the first major central bank to tighten monetary policy in response to the energy price shock. The ECB left rates unchanged at 2.25% last week, although policymakers on the Bank’s governing council discussed a further increase. Last week markets were pricing two further quarter-point ECB rates hikes by early 2027, with the first anticipated as soon as September. Prior to the conflict the Bank of England (BoE) had been expected to cut rates in 2026, but markets currently price a hike towards the end of the year. The BoE are expected to remain in wait-and-see mode, holding rates at 3.75%, when the next monetary policy decision is taken later this week.
The latest surge in oil prices has seen a renewed sell-off in bond markets, with borrowing costs for major economies increasing, as persistent inflation worries exacerbate fiscal concerns. Last week saw the US 30-year bond yield pass through 12 consecutive days of trading above 5%, the longest such streak since the financial crisis.
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