Week ending 24th July 2026.

Market returns were broadly positive across regions, although US equities lagged and Ireland finished marginally lower. Investors digested a generally strong earnings season. However, higher oil prices, concerns about elevated technology investment, and renewed trade tensions contributed to a more cautious market tone.

US stocks closed the week lower whilst corporate earnings provided a mixed picture. Although many companies continued to report solid results, several large technology firms came under pressure as investors questioned whether the pace of spending on artificial intelligence will generate sufficient returns. Both Tesla and Google’s parent company Alphabet fell even after reporting strong second-quarter revenues.

However, investors focused on their capital expenditure plans, reflecting continued sensitivity to valuations and the potential impact of higher spending on future profitability.

Trade policy returned to the spotlight after President Donald Trump announced a new round of tariffs on 60 of the United States’ largest trading partners, including the UK, China, the European Union, Canada, Japan and India. The measures, ranging from 10% to 12.5%, replace the temporary 10% global tariff that expired this week.

The US administration says the tariffs are aimed at strengthening enforcement against forced labour. However, these concerns are not generally seen as relevant to countries such as the UK and much of Europe, which have nonetheless been included in the broader package. Markets have become increasingly desensitised to tariff announcements, and these measures are less extensive than many had feared. With trade negotiations continuing across several key relationships, there remains potential for further changes in the months ahead.

Geopolitical tensions intensified after Iranian-backed Houthi militants targeted Saudi oil tankers in the Red Sea, pushing Brent crude above $100 per barrel for the first time since May and renewing concerns that higher energy costs could complicate the inflation outlook. Government bond yields also moved higher, reflecting expectations that interest rates may remain elevated for longer if inflation proves persistent. As bond prices and yields move in opposite directions, this increase in yields weighed on fixed income markets.

However, the Pentagon halted its bombing campaign over the weekend following 13 consecutive nights of strikes. The absence of any reported Iranian attacks on neighbouring countries helped ease market concerns, contributing to a decline in Brent crude prices.

UK equities, however, remained relatively resilient, supported by gains in oil and defence stocks.

Markets weighed the potential inflationary impact of Prime Minister Andy Burnham’s early policy agenda and higher oil prices. In his first week in office, Burnham announced a VAT cut on household electricity bills, a £2 cap on bus fares, and a 20% reduction in business rates for pubs, clubs, theatres and live music venues from April 2027. While he has pledged to maintain existing fiscal rules, investors remain cautious given the UK’s high debt burden and borrowing costs, with attention now turning to the Autumn Budget for greater clarity on how these measures will be funded.

In Europe, the European Central Bank left its main deposit rate unchanged at 2.25%, a decision that was widely expected by markets. President Christine Lagarde acknowledged that rising oil prices linked to renewed Middle East tensions present an upside risk to inflation, boosting market expectations of a rate rise in September.  Also in Europe, Composite PMI rose to 51.9 in July from 50.0 in June, marking the first expansion in business activity in four months. Growth was supported by stronger services activity and the fastest manufacturing output increase since March 2022, alongside improving demand and a return to growth in Germany.

Coming up next week, the US Federal Reserve is expected to hold rates steady on Wednesday 29th July in its second meeting under new chair Kevin Warsh. Recent consumer and producer price data that were cooler than expected helped calm rate-hike bets, but a resurgence in oil prices means markets are raising their bets again. Meanwhile, earnings reports from Apple, Microsoft and Amazon are due as investors count on a strong quarter for U.S. corporate profit and focus on AI spending trends. GDP data from across Europe is also due, as well as Bank of England interest rate decision mid-week where policymakers are also expected to hold rates steady.

Kate Mimnagh, Portfolio Economist