Skittish stock markets struggled to maintain the positive momentum of the previous week and, following a barrage of bad news, it’s beginning to look like the previous week may have been the aberration. The week started with an outsized jump in Eurozone inflation in May, to 8.1%, and the fact that the announcement of this data coincided with the announcement of the European Union’s embargo on Russian oil was not helpful. It also didn’t help that a bunch of American corporate chieftains ambushed markets with dire warnings about the state of the economy. Among them was the much-respected Chief Executive of JP Morgan Chase & Co, who warned of an impending economic “hurricane”. Fears of stagflation intensified, stock markets struggled for a couple of days and investors fled to the safe haven of the US Dollar.

A promising mid-week rally was then snuffed out by further corporate shenanigans: Elon Musk, founder of Tesla and part-time cult hero, declared that he had a “super-bad feeling” about the US economy and vowed to cut salaried staff by 10%. Later the same day, American employment data for May turned out to be better than expected, but was written off as being either the last hurrah for the US economy, or an excuse for the Federal Reserve to continue to raise rates aggressively. Stagflation again.

Another rally at the start of this week, encouraged by hopes that China will soon be ending its regulatory clampdown on technology companies, brought markets back full circle. While it’s promising that stock markets are trying to climb the so-called “wall of worry”, economic evidence is growing that consumers are being impacted by inflation at 8%. The profits warnings seen recently in the retail industry are spreading to other industry sectors. It will be difficult for investors to hold their nerve if expectations for corporate profits turn definitively downwards and, while investors might have been able to ignore the profits warnings by down-market Walmart or Target, they are certainly not anticipating profits warnings by up-market brands such as Tesla.

However, the improving sentiment towards China is probably justified, with the recent Covid-lockdowns seemingly coming to an end, the government taking action to ameliorate the economic slowdown, and the Biden administration talking about lifting tariffs. Given the current depressed state of Chinese asset prices, it does not take much to encourage buyers, as demonstrated when shares in Didi Global, China’s version of Uber, initially jumped by 56% after the Wall Street Journal reported that the Chinese government’s investigation into the company could end this week. As regulatory interference has been one of the main threats hanging over Chinese technology stocks over the past year, another piece of the jigsaw may be falling into place.

British investors, meanwhile, were treated to a ringside seat in the contest between Boris Johnson and the Pound Sterling, which have experienced a see-saw relationship ever since Johnson came out in favour of Brexit in 2016, prompting the pound to crash. Sterling appreciated from $1.250 to $1.257 in the two hours after the confidence vote was announced and, once Johnson had won the vote, gave it all back and more.