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In this week’s newsletter:
- Will New Chancellor John Healey Raise Taxes?
- FTSE 100 Stocks to Watch Under Andy Burnham
- Where Next for House Prices?
- Global Energy Crunch Enters a New Phase
- Bitcoin’s Crypto Winter
- Shell Earnings Preview: Oil Prices in View
- Inflation Falls Back in June
- Where Next for Bank of England Interest Rates?
It’s been another week of drama in Westminster but UK bond markets are not showing signs of stress, yet. The UK has a new prime minister and chancellor and a trickle of non-market moving policies have already emerged. The focus is now on what John Healey, the new chancellor, has in store for tax, spending, and government borrowing. With the FTSE 100 creeping towards 11,000 points again, Andy Burnham’s ambitious 10-year plan is likely to have a significant impact on key stock market sectors such as housing and utilities.
UK earnings season is accelerating, with updates from takeover target easyJet and data provider RELX RELX, whose shares are screening as undervalued after a turbulent year. Next week sees a raft of earnings from some FTSE 100 big hitters such as Shell, London Stock Exchange LSEG, Rolls-Royce RR., GSK GSK, Unilever ULVR, and Lloyds Banking Group LLOY. In Europe, investors are looking ahead to Stellantis earnings, which Morningstar senior reporter Karen Gilchrist has previewed.
After weaker-than-expected inflation data was released this week, attention moves to the Bank of England, which is not likely to change interest rates on July 30. Futures markets have now shifted to pricing in three interest rate rises, factoring in higher oil prices, a rise in long-term government bond yields across the world, and the potentially inflationary impact of new UK fiscal policy. Christian Mayes summarizes the BoE’s many challenges in this preview.
If the Bank of England were to raise rates three times to 4.50%, that would be another negative input into the housing market, which experts say is struggling to gain traction. Property portal Rightmove also blames a “summer of distractions” such as the heatwave and football, for deterring would-be buyers. Read Ollie Smith’s outlook for house prices here.
Away from politics and economics, Morningstar Italy’s Valerio Baselli has looked again at the prospects of bitcoin, whose price has tested UD 60,000 this year in the latest “crypto winter”. With midterms looming, US politics now plays an outsized role in the fortunes of the largest cryptocurrency.
James Gard, Editor, Morningstar UK
