The latest economic news and market highlights from the UK and abroad.
This week's headlines:
- Keir in trouble – a number of government ministers resigned this week, putting Keir Starmer’s future as Prime Minister in doubt. Though no leadership contest has been triggered yet, potential candidates are jostling to make moves. The 10-year gilt yield broke above 5.1%, the highest since before the 2008 financial crisis.
- Mr Trump goes to China – Donald Trump visited China to meet with President Xi taking with him an entourage of tech CEOs including Jensen Huang of Nvidia, Elon Musk of Tesla and Tim Cook, formerly of Apple. Topics of discussion included the US-Iran war, ongoing economic cooperation and trade. The big issue for China is Taiwan. No major deals seem to be struck yet, leaving markets largely unmoved.
- No more gold please – as the war drags on, India’s Prime Minister Narendra Modi made a direct appeal to the country on Sunday to buy less gold and avoid unnecessary foreign travel, to help finances and shore up the rupee. India imports about 90% of its oil and half of its gas via the Strait of Hormuz, so will be feeling the economic effects of the war.
- New Fed Chair confirmed – the US Senate formally confirmed the new Federal reserve (Fed) Chair Kevin Warsh on Wednesday. Only one democrat voted in his favour, meaning it was a decision split along party lines.
- UK economy sees surprise growth – on Thursday the Office for National Statistics (ONS) announced that the UK economy grew by 0.3% despite seeing the first impact of the US-Iran war. The quarterly growth was 0.6%, the fastest for a year and the highest of all the G7 countries to report so far. Last month the International Monetary Fund (IMF) warned that the UK would be the hardest hit from the war of the world’s advanced economies.
What this means for financial advisers and clients
This week has again shown the impact politics can have on stock markets. Questions of Keir Starmer’s leadership have unsettled the UK bond markets and affected borrowing power, making things uncertain. Further around the world, Narendra Modi’s attempt to clamp down on spending in India caused both Indian shares and the rupee to fall.
And in the US, the decision over the Fed Chair was a highly political issue. The vote for Warsh’s confirmation was the narrowest it’s ever been with a 54-45 result.
The Fed sets the interest rates for the US, making its independence critically important to investors. There are concerns that the new Chair could face pressure from Trump to lower interest rates, when conventionally they should be raised in periods of high inflation (currently 3.8% in the US). He’d have to convince the rest of the Fed’s board to do so though.
Meanwhile, the US-China meeting to was expected to solve some of the big issues affecting everyone. The Strait of Hormuz, and US economic cooperation with China has a huge impact on the global economy. But it hasn’t come up with anything concrete so far, so markets weren’t particularly moved by it.
Chart of the week - Britain's 10-year borrowing costs have surged over the past decade
Closing prices, except for latest.
Source: LSEG, Dhara Ranasinghe, Investing.com
Why’s this worth sharing?
This week casting began for the new James Bond. But the bonds that really mattered this week were UK gilts.
Long-term UK borrowing costs, as seen by the 10-year gilt yield rose to their highest since 2008. Over the course of this week, we saw the impact of uncertainty around Keir Starmer’s leadership on the gilt market, with yields rising when it was called into doubt.
Why? There are worries that whoever replaces him might be a big spender - and that means he’s being supported by “Bond vigilantes”. They’re not rogue agents from the films, though some politicians might think they’re villains.
Who are they? Debt investors who seek to impose fiscal discipline on governments by demanding higher compensation to hold their bonds. The political impact of rising borrowing costs has been seen before, under Liz Truss, the raised costs of borrowing and market turmoil ultimately contributed to her resignation as Prime Minister. So, they can have quite an impact.
In fact, yields rose on Friday morning after Andy Burnham emerged as a potential leadership candidate, raising 10-year gilts to 5.14%.
This highlights the impact that individual politicians and economic uncertainty can have on markets - but also it works the other way around too.
The Markets
UK – The FTSE 100 grew this week while the FTSE 250 stayed flat.
US – The S&P 500 has continued to grow over the week, trading at record highs. The US 10-year treasury yield also increased due to inflationary fears.
Oil – Oil prices have increased over the week, but they remain volatile and prone to changes based on the prospects of a peace deal.
Japan – Japan’s 20-year government bond rate rose to its highest level since 1996. Japanese stocks may also start to see the pressure of rising oil prices and disruption to the supply of materials. One Japanese snack company has moved from coloured packaging to black and white to tackle the problem of disruptions in the supply chain.
Emerging Markets – Korean stocks fell back a bit this week following last week’s highs – which may have been connected to higher bond yields globally as well as facing the impact of increased oil prices.
| | Weekly Change | YtD Change |
|---|---|---|
| FTSE 100 | 1.56% | 5.99% |
| FTSE 250 | -0.02% | 3.01% |
| S&P 500 | 2.46% | 9.62% |
| NASDAQ | 2.25% | 17.13% |
| FTSE Developed Europe Ex-UK | 0.83% | 4.07% |
| FTSE Emerging Markets | -0.26% | 10.16% |
| FTSE Japan | 1.38% | 14.06% |
| Brent Crude | 8.26% | 30.68% |
| Gold Spot | 0.35% | 8.37% |
| UK 10yr Gilt yield | +12bps | +56bps |
| US 10yr Treasury yield | +9bps | +31bps |
Source: Morningstar, exchangerates.org.uk, investing.com and finance.yahoo.com. GBP returns as at close of business on Thursday14th May 2026.
Want to know more?
What do you need to know from April? Geopolitical tensions remained the key market focus. Despite bond caution, equities have rebounded strongly, keeping YTD returns in positive territory - explore more in our monthly market update.
Catch the recording of our Q1 Let’s Talk Markets webinar, where the team discussed recent market developments, key drivers behind portfolio performance, and the outlook for the months ahead.
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