Macroeconomics

As we approach the end of the reporting season for European financials, including banks and insurers, Q2 2026 has proven to be another strong quarter, with most reported earnings coming in ahead of consensus and several banks upgrading their already ambitious profitability guidance for the year.

The latest Federal Open Market Committee (FOMC) meeting left a strange taste on investors' mouths. In our view, Chair Kevin Warsh failed to clarify the Federal Reserve’s (Fed's) reaction function and the central bank’s views on the current economic picture and relating to monetary policy.

Federal Reserve (Fed) Chair Kevin Warsh hosted his second Federal Open Market Committee (FOMC) meeting this week, with most people, including ourselves, expecting a hawkish hold.

Andy Burnham is set to become UK Prime Minister unopposed from within his own Labour Party, but he may face tougher opposition in the form of the bond market.

The German government has been quite an active and bold one since it took office some 15 months ago.

Having initially expected central banks to cut interest rates in 2026, investors now face a hawkish pivot after the European Central Bank (ECB) hiked rates at its June meeting.

UK government bond yields have pushed higher this month as markets have digested a building political crisis, with the prime minister, Sir Keir Starmer, now set to face a Labour Party leadership contest following dire local election results on May 7.

European bank results for the first quarter of 2026 have revealed a strong start to the year, allaying some of the concern that the prolonged conflict in the Middle East might impact bank fundamentals to some extent.

Fixed income markets have shown a degree of resilience this year, with credit spreads remaining tight and demand for income holding up, despite ongoing geopolitical tension, inflation uncertainty and growing fiscal concerns.

Credit markets have been remarkably resilient in the face of significant geopolitical and macroeconomic volatility in recent weeks.

With tensions in the Strait of Hormuz increasing over the weekend and markets getting used to oil prices well in excess of $100 per barrel, this seems an opportune moment to zoom out and look at the state of play in fixed income markets, considering the unsettling reality of a longer-than-expected conflict in the Middle East.

Sharp swings in government and corporate bond markets since the onset of the Middle East conflict pose interesting questions for fixed income investors.