1 September 2026
Last week in the UK, economic data showed that optimism amongst British businesses grew in August as Lloyds Bank’s confidence index rose to 53%, the highest since the start of the Iran conflict. Business inflation expectations fell to a five-year low, whilst the latest Citi/YouGov survey showed an increase in the general public’s expectation of higher inflation, meaning that perhaps households are bracing themselves for higher prices. These contrasting data indicators can leave the Bank of England (“BoE”) in a difficult spot as rising inflation expectations are directly shifting rate forecasts, forcing money markets to push back expectations for the BoE’s next rate hike to February 2027.
Fiscally, Prime Minister Andy Burnham has ruled out raising income tax, VAT or national insurance, leaving Chancellor of the Exchequer John Healey with little room to fund a £4.7 billion defence shortfall. To cover that gap, the government delayed planned welfare reforms until next year. Meanwhile, the Telegraph reported that internal Treasury modelling shows that raising capital gains tax (“CGT”) rates further would backfire by reducing net receipts. With major tax hikes off the table and capital gains levers constrained, the Treasury faces a tight squeeze ahead of the 28 October budget.
In the markets, some pre-budget nerves are now being seen as the benchmark 10-year gilt yield jumped towards 5.2%, bringing sovereign borrowing costs close to 2008 highs. Rising yields are amplifying calls for the BoE to halt its active bond selling program at its September meeting to relieve market pressure. In equity and corporate news, sentiment remained cautious as the government suspended plans to put Thames Water into special administration, citing severe legal costs and leaving the utility’s rescue negotiations unresolved.
Across the pond, the main US equity indices finished mostly higher, led again by mega-cap technology and a sharp rebound in software, while energy and defensive sectors lagged. Market sentiment was anchored by blowout quarterly results and ambitious revenue guidance from Nvidia, though momentum shares surrendered gains late in the week. Short term, Treasuries sold off after Federal Reserve Chair Kevin Warsh delivered a hawkish speech, highlighting inflation risks and raising expectations for an upcoming rate hike. Commodities weakened as gold snapped its multi-week rally and crude oil dropped alongside perceived improvements in Middle East transit volumes. Geopolitical focus shifted to trade friction as President Donald Trump rejected prior diplomatic frameworks and the White House imposed heavy tariffs on Canadian imports, drawing immediate retaliatory measures.
Across the globe, market performance was mixed outside the US and UK. European macroeconomic data showed Germany’s gross domestic product (“GDP”) stagnated, with only 0.3% growth, contrasting with zero growth in France and accelerating inflation in Spain, which reached 4.3%. In Japan, 10-year government bond yields rose to 2.93% after Tokyo inflation accelerated, reinforcing expectations of Bank of Japan policy tightening. In China, industrial profit growth slowed to 11.2%, though artificial intelligence infrastructure demand supported hardware producers. In Canada, equities reached record highs on strong second quarter GDP growth and a current account surplus, despite renewed trade friction.
Computacenter, a UK technology infrastructure reseller providing IT software and hardware services to corporate clients, saw its shares jump 11.50% last week, closing the week at £56.70, to hit a record high, boosted by broader tech sector optimism and broker upgrades. The stock rallied following Nvidia’s higher-than-expected quarterly results and revenue guidance, which lifted technology valuations despite limited direct commercial overlap with Nvidia's data centre business. Sentiment was further supported after Peel Hunt upgraded Computacenter to a 'Buy' rating with a higher price target, extending a multi-day rally as the market responded to positive sector trends.
Melrose Industries, an aerospace and defence company specialising in industrial manufacturing and engineering, had a positive week as its shares surged 9.55%, closing at 515.2 pence per share after US authorities closed a criminal investigation into a chemical tank incident at its California facility with no charges filed. The group aims to restart manufacturing at the site in late September and will establish a $100 million claims programme for affected local residents and businesses. Analysts noted that while civil fines remain possible, the closure of the criminal inquiry quantifies the financial impact and lowers operational risk for investors.
BP, a major UK energy company operating in global oil production and refining, had a tough week as its shares fell 6.37%, closing at 514.5 pence per share, due to declining crude oil prices weighing on major energy producers. Oil prices dropped following reports of diplomatic discussions involving Qatar, Iran, and Oman regarding commercial transit through the Strait of Hormuz, easing concerns over potential supply disruptions. The fall in Brent Crude triggered selling across energy equities, overshadowing separate reports that BP is in exclusive talks to sell select upstream oil and gas assets in Egypt to Energean for approximately $1 billion.
Market Commentary prepared by Walker Crips Investment Management Limited.
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Important Note
No news or research content is a recommendation to deal. It is important to remember that the value of investments and the income from them can go down as well as up, so you could get back less than you invest. If you have any doubts about the suitability of any investment for your circumstances, you should contact your financial advisor.
The value of investments can fall as well as rise. Investors may get back less than invested. Past performance is not a reliable indicator of future results.
The value of investments can fall as well as rise. Investors may get back less than invested.
