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In This Week’s Newsletter
- Why Global Bond Yields Are Rising
- What Europe’s Extreme Weather Means for Stocks and the Economy
- UK Inflation Rises to Four-Month High
- How to Pick the AI Winners
- Bank of America’s Raedler Warns of AI Pullback
- Undervalued UK Stocks After Earnings
Long-term bond yields lurched higher this week in the United Kingdom, but this time, investors aren’t fretting about a domestic problem. Across the developed world, yields on 10- and 30-year maturities have spiked, with a particular focus on the United States, where the national debt has topped USD 40 trillion. One impact of the surge in long-term yields is that the UK government must contend with even higher borrowing costs, which are around £110 billion every year.
The weather has been front of mind for those in London offices this summer. Besides boosting the profits of companies that make or fit aircon units, investors may assume this real-world risk could recede if summer 2027 is more “normal.” Not so, according to European economists. Morningstar Germany’s Antje Schiffler has spoken to some of them about the likely impact of drought and wildfires on the region’s economy and companies.
So far, the hot weather hasn’t shown up in UK inflation figures, but the effects of the Iran war were visible in July’s CPI data. Last month, gas prices (directly linked to UK energy bills) were nearly 15% higher than in July 2025. We checked in with economists about the inflation outlook.
Morningstar senior reporter Karen Gilchrist has had some excellent guests in recent days: a tech fund manager at Carmignac and the head of European equity strategy at Bank of America. Both tackled the AI boom head-on. Carmignac’s Kristofer Barrett dismisses the idea that we are at the peak of the cycle, and he backs the competitive advantages of hardware stocks. BofA’s Sebastian Raedler is much more cautious, saying the market is pricing AI success as a certainty, without reference to the many boom/bust cycles throughout history.
Now that the UK earnings season is over for the large caps, Christian Mayes looks at which FTSE stocks are screening as undervalued. One is AstraZeneca AZN, which until recently was the country’s largest listed stock. Analysts say merger talk has unsettled investors, and the shares are down this year. In contrast, progress in a skin cancer vaccine trial lifted fellow pharma giant Moderna MRNA 150% in one day. You can find Morningstar analyst Karen Andersen’s take on the stock here, including a new valuation estimate.
