The week that was …
Economic round-up
UK interest rates held again
As widely anticipated, the Bank of England held UK interest rates at 3.75% although it made it clear rates would need to rise if the Iran war energy shock fed into broader UK inflation. The central bank’s Monetary Policy Committee voted eight to one to keep the key rate unchanged for the third consecutive meeting. Read more from the FT here
Fed holds US rates in final meeting of Powell era
The Federal Reserve kept US interest rates on hold at 3.5% to 3.75% last week after what is expected to be Jerome Powell’s final meeting as chair of the central bank. Shortly before the decision was announced, his successor Kevin Warsh won the backing of a key Senate committee to take up the role next month. Read more from the BBC here
Euro-area rates maintained at 2%
The European Central Bank left euro-area interest rates unchanged at 2% last week, but indicated a hike could be necessary to combat higher inflation resulting from the war in Iran. Inflation in the bloc jumped to 3% last month – well ahead of the ECB’s 2% target. Read more from Reuters here
BoJ holds rates despite inflation concerns
Again, as widely expected, the Bank of Japan held interest rates at 0.75%, despite forecasting a sharp rise in inflation. Three rate-setters disagreed, however, calling for an immediate rate increase to 1% – a reflection of fears the central bank is already at risk of falling behind the curve. Read more from the FT here
UK enjoys manufacturing bounce
Despite heightened cost pressures and delivery delays resulting from the Middle East conflict, activity in the UK’s manufacturing sector rose to its highest level for almost four years, according to the S&P Global UK manufacturing purchasing managers index (PMI) survey. This showed a reading of 53.7 in April – up from 51 the month before – and the highest level seen since May 2022. Read more from the Independent here
Q1 US economic growth below expectations
The first-quarter US GDP report showed expansion of 2% annualised – below consensus analyst expectations of 2.2%. Slowing consumer spending was a particular worry for economists – coming in at 1.6%, down from 1.9% in the fourth quarter of 2025. With higher gas prices on the way, this figure may worsen in the current quarter. Read more from the FT here
US national debt at highest since 1940s
US national debt is now larger than the country’s economy as a whole, hitting its highest levels since the 1940s. Figures released by the Bureau of Economic Analysis showed total debt held by the American public is now $31.27tn (£23.06tn). The country’s nominal gross domestic product meanwhile was estimated at $31.22tn. Read more from the Independent here
US consumer confidence holds firm
US consumer confidence unexpectedly edged higher in April, although higher gasoline prices remain a worry for shoppers. Confidence was driven by the rally in share prices, the prospect of a ceasefire in Iran and an improving labour market. Read more from Reuters here
Mixed picture for China industry over April
Factory activity in China beat consensus analysts’ expectations in April, although growth was slower that the previous month when it hit a year-high. The manufacturing PMI reading was 50.3, higher than the 50.1 expected by Reuters-polled economists. Non-manufacturing PMI fell into contraction territory at 49.4. Read more from CNBC here
Markets round-up
US stocks enjoy best month since 2020
April proved the best month for US stocks since 2020, with the S&P 500 climbing 10%. The tech-heavy Nasdaq Composite index meanwhile surged 15% as investors bet the AI boom would deliver a windfall to America’s tech behemoths. Read more from the FT here
Tech delivers strong earnings
Google’s first-quarter earnings outshone those of its rivals, with faster cloud growth. The large technology groups upped their AI infrastructure spending plans to $725bn (£535bn) this year. Investors broadly welcomed the earnings reports as demand for AI and data-centres drove large jumps in revenue and profits. Read more from the FT here
FTSE rallies on newsflow
The FTSE 100 rallied on Thursday as investors digested company earnings, interest rate announcements and the latest developments in the Middle East. The main UK index closed up 165.71 points, or 1.6%, at 10,378.82. Read more from the Independent here
Oil prices down from peak …
Oil prices fell on Friday after Iran sent an updated peace proposal to mediators in Pakistan, with Brent crude falling nearly 2% to settle at $108. The proposal was delivered to the US but president Donald Trump later said he was not satisfied with the offer. Read more from CNBC here
… but US fuel prices rise highest of G7 nations
Fuel prices have increased faster in the US than in any other G7 country since the Iran war began, according to research from JP Morgan. US petrol prices at the pump have jumped 42% since the days leading up to the war in late February. The next highest increases in G7 countries were recorded in Canada and the UK, where prices were up 24% and 19% respectively. Read more from the FT here
BP comes under fire over profits
BP was criticised after revealing a 130% surge in profits during the first three months of the year. Underlying profits rose to $3.2bn – well ahead of consensus analyst estimates of $2.7bn. Critics labelled the energy giant’s revenues as “horrifying”. Read more from the Independent here
Oil majors reject Trump’s calls to pump more oil
ExxonMobil and Chevron defied calls from the White House to increase oil production. Exxon’s chief financial officer Neil Hansen said there had been “no change” to the company’s strategy in the Permian Basin, while Chevron’s finance chief Eimear Bonner said: “The crisis has not prompted any change to any of our plans.” Read more from the FT here
UK exports to US plunge over 12 months …
UK goods exported to the US have plunged around 25% since president Trump’s ‘Liberation Day’ tariffs were imposed last April. Goods exports to the US, excluding precious metals, fell by £1.5bn, or 24.7% and have remained muted. Read more from CNBC here
… as Trump takes aim at European autos
Donald Trump said he would increase tariffs on European cars and trucks to 25% although the US president did not say how he would raise the levies. He maintained the European Union was not complying with the terms of the US/Europe trade deal but added that companies with production in the US would not have tariffs applied. Read more from CNBC here
“The danger is that central banks – and the Bank of England appears particularly guilty here – assume they are dealing with the previous crisis, rather than the one in front of them.
Selected equity and bond markets: 24/04/26 to 01/05/26
| Market | 24/04/26 (Close) |
01/05/26 (Close) |
Gain/loss |
|---|---|---|---|
| FTSE All-Share | 5566 | 5558 | -0.1% |
| S&P500 | 7165 | 7230 | +0.9% |
| MSCI World | 4633 | 4674 | +0.9% |
| CNBC Magnificent Seven | 430 | 431 | +0.4% |
| US 10-year treasury (yield) | 4.31% | 4.38% | |
| UK 10-year gilt (yield) | 4.95% | 5.00% |
Investment round-up
Saba wins Edinburgh Worldwide fight
Saba Capital has won its campaign against the board of Edinburgh Worldwide. Shareholders in the investment trust voted for Saba’s plan to oust chair Jonathan Simpson-Dent and five other board members and to install three Saba-backed board nominees. The result gives Saba control of the trust.
Aberdeen promotes Zangerl
Aberdeen Investments has promoted Marianne Zangerl to global head of multi-asset and alternative investment solutions. She will succeed Darren Wolf, who is to leave the business. Zangerl was previously deputy global head of fixed income.
SJP sees fall in net flows over Q1
St James’s Place saw net flows fall around 10% – from £1.7bn to £1.5bn – over the first quarter of 2026. Gross flows were up marginally, at £5.2bn, but the business experienced a higher level of outflows from clients cashing in their SJP products.
Amundi benefits from ETF demand
Amundi enjoyed its strongest quarter in four years in the first three months of 2026, with strong demand for its exchange traded funds and bond products amid volatile markets leading to €32bn (£27.65bn) of net inflows. This was well ahead of consensus analyst expectations of €12.8bn.
Investors steady in the face of turbulence, IA survey finds
Research from the Investment Association, in partnership with Opinium, found almost half (47%) of investors surveyed were not planning to make immediate changes to their portfolios in response to the conflict in the Middle East. More than half (56%) indicated their confidence in investment for the long term remained the same.
Aegon and Artemis funds win FundCalibre Elite rating
Aegon Global Equity Income and Artemis SmartGARP Global Emerging Markets have been added to the FundCalibre Elite Ratings list of recommended funds. The Aegon fund is managed by Mark Peden, Douglas Scott and Robin Black, while the Artemis fund is run by Raheel Altaf Canaccord
Wealth offers crypto options
Canaccord Wealth has become the first major wealth manager to offer managed exposure to cryptocurrencies as part of its tailored discretionary investment proposition for high-net-worth clients.
BlackRock launches four iShares ETFs
BlackRock’s latest iShares Ucits ETFs will apply a revenue-based lens to divide regional indices into domestic and foreign baskets. The new ETFs will offer a UK domestic focus, a UK foreign focus, a Europe domestic focus and a Europe foreign focus.
… and the week that will be
Investors eye next wave of earnings reports
Investors will hoping another batch of earnings reports and fresh employment data will continue to support stockmarkets this week, even as oil prices remain elevated. The US stockmarket continues to hit new highs, in spite of the ongoing fallout from the Iran war. For the time being, investors seem to be reassured by a stellar season for corporate profits. Read more from Reuters here
Labour steels itself for local election results
About 5,000 seats will be contested across 136 English councils, in addition to six mayoral contests for the individuals who directly run the London boroughs of Croydon, Hackney, Lewisham, Newham and Tower Hamlets, as well as Watford. There are also elections in Scotland and Wales. The key question is whether this could topple Keir Starmer as prime minister and, while Labour is braced for disaster, that will depend how bad it becomes. Gilt yields could well come under further pressure. Read more from the FT here
The week in numbers
UK construction sector: Consensus forecasts have the purchasing managers index (PMI) for the UK construction sector falling to 45.2 in April, down from 45.6 the previous month.
US employment data: Consensus forecasts have April non-farm payrolls in the US at 95,000 – down from 178,000 the previous month – while the unemployment rate is forecast to hold steady at 4.3%.
US consumer confidence: Consensus expectations have the preliminary May reading of the closely-watched Michigan index showing US consumer sentiment recovering slightly – with a rise to 50 from 49.8 in April.
US services sector: Consensus expectations are for the ISM services PMI in the US to fall to 53.7 in April, from 54 in March.
In focus: Central intelligence
The Bank of England, Bank of Japan, European Central Bank and Federal Reserve all had rate-setting meetings last week and all, on the face it, came to the same conclusion: keeping their respective interest levels where they were. Nothing to see here, then? Well, not quite – behind this maintaining of the status quo, voting patterns, forward guidance and post-meeting press statements offered insights into the thinking of four of the world’s major central banks.
Starting with the largest, the Fed’s Federal Open Market Committee (FOMC) may have voted 11 to 1 in favour of holding at 3.5% to 3.75% yet there was some disagreement over the wording of their statement. “Notable, in our view, were the three dissents by voting participants who did not support keeping the implicit easing bias in the policy statement’s forward guidance language,” says Tiffany Wilding, economist at Pimco.
“We presume their preference would have been a stronger signal that the next interest rate move, whenever it occurs, could be either a hike or a cut. Our own view remains that the next move will be a rate cut, but the timing is far from clear.”
Markets broadly appear to have interpreted the Fed’s signals as a hawkish shift. Wilding sees roughly 3% as the neutral policy rate but concedes the path is uncertain, adding: “If the Iran conflict and energy shock appear more persistent, it could take longer for core inflation to more clearly begin to moderate back toward the Fed’s target, complicating the decision to ease monetary policy.”
In the longer term, the most significant news from the press conference may be that Jay Powell plans to remain on the FOMC after his tenure as Fed chair ends on 15 May. That would push out Trump choice Stephen Miran – the only committee member to vote in favour of a cut this month – and in turn may keep the Federal Reserve on a more hawkish path than might otherwise have been expected.
The Bank of England may have held but the ‘credibility cost’ of March is still being paid for in the gilt market every day.”
For the UK, the hold on rates came too late to bring the gilt market back from the brink. Although the vote to hold rates at 3.75% was reached with a clear 8-1 majority within the Bank of England’s Monetary Policy Committee (MPC), in signalling a potential rate last month, bank governor Andrew Bailey had already done the damage with markets.
“The bank may have held but the ‘credibility cost’ of March is still being paid for in the gilt market every day,” says James Flintoft, head of investment solutions at AJ Bell. “The MPC opened the door to an April hike last month, the market sprinted through it and the governor spent the next fortnight trying to close it again. That does not feel like the rhythm of a central bank firmly in command of its own narrative.”
Flintoft points to the subsequent “violent repricing” in the gilt market, with two-year gilt yields above 4% for the first time since October, and the 10-year benchmark now above 5%. “Governor Bailey’s subsequent attempts to pull markets back – including telling investors mid-month that they were ‘getting ahead of themselves’ landed late,” he argues. “A central bank that signals tightening one month and counsels patience the next is one that markets and the Treasury will all struggle to plan around.”
Nevertheless, bond-market pricing still looks out-of-whack, with the two-year yield implying three interest rate hikes in short order. “The bar for hikes remains high,” says Schroders’ head of global economics David Rees. “With some slack emerging in the labour market and growth likely to weaken if disruption drags on, we doubt the Bank of England will tighten unless economic activity stays strong enough to absorb it.”
Across the Channel, the ECB adopted a balanced tone as it announced its decision to hold rates at 2%, saying it had debated both a cut and a hike. “Ultimately a ‘wait and see’ approach was seen as justified,” observes Max Stainton, senior global macro strategist at Fidelity International.
Broadly speaking, all central banks are adopting a ‘wait and see’ approach – but with a hawkish tilt. Bond markets have taken this to mean rate rises are inevitable but that is not necessarily the case.”
“The decision to hold was made against the backdrop of only marginally more information relative to March with the newsflow over the next six weeks providing more clarity on how the shock is playing out.
“We see the ECB hiking in the near term – to lean against the inflationary impulse of higher energy prices and supply-chain disruptions in order to contain potential second-round effects and ensure the ECB clearly commits to reining in inflation.”
Of this quartet, the Bank of Japan may be the most interesting one to watch. So far, it has proved reluctant to change policy direction but there was some rare dissent in this month’s deliberations, with three of the nine members voting for a hike from 0.75% to 1%. The bank meanwhile raised its full-year 2026 core inflation outlook from 1.9% to 2.8%.
Second-order effects
Broadly speaking, all central banks are adopting a ‘wait and see’ approach – but with a hawkish tilt. Bond markets have taken this to mean rate rises are inevitable but that is not necessarily the case. The key variable over which central bankers have no visibility is the second-order effects of inflation – and this is what kept inflation so high in the wake of the Ukraine crisis in 2022.
“The blockage of an interlocking web of commodity flows and refined products could disrupt agriculture yields via fertiliser shortages; raise transportation and packaging costs and impact a range of industries such as automotive, which is reliant on aluminium and rubber, and electronics, which uses helium for cooling and sulphuric acid for cleaning,” says Tim Drayson, head of economics at L&G. “These effects will take time to appear but will become more apparent if supplies fail to resume in the next few weeks.”
The problem is, Drayson warns, these issues can create both inflation and growth risks. To a certain extent, the risks are of higher inflation but, once it goes too far, that creates demand destruction and the risks are to growth. “In 2022,” he adds, “wages quickly responded to higher headline inflation and companies then passed these cost increases onto consumers.”
Things are different this time, however, believes Drayson, explaining: “The critical difference in 2022 was surging demand alongside the supply shock. Inflation was already set to rise as pent-up spending from large-scale fiscal support and reopening post-Covid combined with a scramble to find workers to meet this demand. This led to extremely tight labour markets. Unemployment had fallen as far as friction allowed.”
Today, by comparison, labour markets are far looser and workers have far less bargaining power. “It seems more likely the supply shock will squeeze real incomes without any corresponding increase in wages,” says Drayson. Hiking rates into that environment would therefore likely prove a significant error, condemning economies to longer-term weakness.
The bond market appears to have assumed – and particularly so in the UK – that central bankers will ultimately be forced to hike but that is not at all clear. The danger is that central banks – and again, the Bank of England appears particularly guilty here – assume they are dealing with the previous crisis, rather than the one in front of them.
Read more on this from Investopedia here and from Legal & General here
In focus: Trust issues
It has been a week of mixed fortunes for the investment trust sector. On the one hand, Saba Capital finally got its hands on one of its target trusts, Edinburgh Worldwide – along with its precious holding in SpaceX. On the other, the UK government confirmed that investment trusts would be included in the Pension Schemes Bill, resolving a bizarre anomaly that had threatened to see the sector miss out on a major shift in workplace pension schemes.
The fate of Edinburgh Worldwide brought a sad end to a lengthy saga. “While it may have successfully fought off Saba’s previous efforts – both last year and at the beginning of this year – the trust has suffered an ebbing away of long-term shareholders over time and this has made the activist’s task of assuming control somewhat easier,” says Danni Hewson, head of financial analysis at AJ Bell.
“The writing seemed to be on the wall after Saba and two other institutions voted down a tender offer proposal earlier this month, which would have effectively wound the trust down before [Saba Capital founder and CIO] Boaz Weinstein’s vehicle could take over.”
The prize for Saba appears to have been Edinburgh Worldwide’s biggest holding, SpaceX. According to Hewson, once the blockbuster IPO happens in the next few months, Saba’s plan seems likely to be to liquidate this stake and turn the trust into a vehicle for investing in other undervalued UK investment trusts.
The implications for the remainder of the investment trust sector remain unclear. On the one hand, Saba now has a vehicle to target other trusts, yet its victory may also galvanise regulators and boards to take more vigorous action to prevent future attacks. As the outgoing chair of Edinburgh Worldwide, Jonathan Simpson-Dent, puts it: This should represent a wake-up call for the investment trust sector and its regulators.”
As for the better news for investment trusts, their exclusion from the Pensions Schemes Bill had always looked anomalous. Describing the government’s change of heart as a “clear positive” for the sector, Anthony Leatham, investment companies analyst at Peel Hunt says: “If the legislation results in greater allocation to sectors such as private equity and infrastructure, investment companies provide an established, liquid route for pension schemes to access those assets.”
He concedes there is no guarantee this will translate into immediate demand but adds: “Bringing investment companies into scope is strategically important and, over time, could provide incremental support for sentiment and help narrow discounts.
“In a market where semi-liquid vehicles are increasingly promoted as access points to private markets, this development also reinforces the case for the closed-ended structure as the most appropriate way to offer daily liquidity against inherently illiquid underlying assets.” This is a rare win for the sector at a difficult time but one that could help it fight back against Saba, which is only likely to continue its assault on investment trusts until regulators act decisively to stop it.
