The Weekly Briefing from Capital Economics

Can another set of blow-out AI earnings reignite the rally that has powered equities for so long but recently seems to have run out of puff? Chief Markets Economist Jonas Goltermann joins The Weekly Briefing from Capital Economics to discuss the latest tech earnings, whether Scott Bessent has managed to cap Treasury yields and what investors will want to hear from Kevin Warsh in his Jackson Hole address. Also on the show, just days after Bessent announced ‘Economic D-Day’ for Iran, Chief Emerging Markets Economist William Jackson assesses how much pain the Iranian economy is in and whether further pressure from the Trump administration could be enough to force Tehran to capitulate. Related content Concentrated earnings probably mean concentrated returns https://www.capitaleconomics.com/publications/capital-daily/concentrated-earnings-probably-mean-concentrated-returns Can Iran continue to hold out? https://www.capitaleconomics.com/publications/middle-east-north-africa-economics-update/can-iran-continue-hold-out

This special episode of The Weekly Briefing from Capital Economics features an exclusive extract from our client briefing on the global bond sell-off, its causes, consequences and where markets go from here. In this edited extract, Group Chief Economist Neil Shearing and Chief Markets Economist Jonas Goltermann answer questions from clients around the world, including: What was Scott Bessent’s Treasury market intervention intended to achieve, and why it has so far fallen short? What are the economic forces pushing investors to demand more compensation for holding long-dated government bonds? Which economies are most exposed to a fiscal crisis? Is the AI credit boom affecting demand for government debt? How high could bond yields rise from here? Related content Read: How to think about the bond market sell-off https://www.capitaleconomics.com/publications/global-economics-focus/how-think-about-bond-market-sell Read: What taxes could Burnham raise to fund his policy ambitions? https://www.capitaleconomics.com/publications/uk-economics-update/what-taxes-could-burnham-raise-fund-his-policy-ambitions

Have a couple of softer US inflation prints taken a post-Summer Fed rate hike off the table? Did that CPI and PPI data vindicate Kevin Warsh’s divisive approach to central bank communications? And what does the death of former Premier Zhu Rongji tell us about China’s political economy today? Group Chief Economist Neil Shearing joins David Wilder to discuss the US inflation and rate outlook, the angst at the long end of the Treasury yield curve, and why the pace and nature of reform in China today not only pales in comparison what was happening at the turn of the century, but could threaten global economic stability. Also on the show, Deputy Chief UK Economist Ruth Gregory discusses her widely covered report on how much tax Andy Burnham could be seeking to raise in October’s Budget. She explains how the potential tax increases compare with the controversial big Budget of 2024, which taxes could rise and what the impact could be on the UK economy. Related content What taxes could Burnham raise to fund his policy ambitions? https://www.capitaleconomics.com/publications/uk-economics-update/what-taxes-could-burnham-raise-fund-his-policy-ambitions Capital Economics events https://www.capitaleconomics.com/events

A jam-packed episode begins with Group Chief Economist Neil Shearing joining David Wilder to discuss what a surprisingly weak US employment report means for expectations that the Federal Reserve will cut interest rates in September. Neil and David are then joined by Chief Markets Economist Jonas Goltermann to unpack the implications of coordinated US-Japanese intervention to halt the yen's slide. They discuss everything from Prime Minister Takaichi's policy agenda and its impact on market perceptions of the currency to whether Scott Bessent's move was also intended to send a message to Beijing about an undervalued renminbi. Finally, Senior Emerging Markets Economist Liam Peach examines the latest update to our EM Financial Risk Indicators, highlighting where we see the greatest risks of a crisis and why, despite the recent energy shock, most emerging markets have remained remarkably resilient. Related content How worried should investors be about Takaichi’s policies? https://www.capitaleconomics.com/publications/japan-economics-focus/how-worried-should-investors-be-about-takaichis-policies Your questions on Japan’s markets answered https://www.capitaleconomics.com/publications/fx-markets-update/your-questions-japans-markets-answered EM Financial Risk Monitor (Jul. 2026) https://www.capitaleconomics.com/publications/emerging-markets-financial-risk-monitor/em-financial-risk-monitor-jul-2026

Kevin Warsh sent financial markets into turmoil with a press conference that muddied, rather than clarified, the Fed's message. But was the confusion all part of a broader strategy from a Federal Reserve chair who takes a dim view of forward guidance? On the latest episode of The Weekly Briefing from Capital Economics, Group Chief Economist Neil Shearing joins David Wilder to discuss why he doesn't think the new chair deserves the benefit of the doubt, and why clearer communication will be essential if the Fed is to preserve its inflation-fighting credibility. Also on the show, Chief Europe Economist Andrew Kenningham explains why, despite the horrific scenes unfolding across southern Europe, this summer's wildfires are likely to have only a limited economic impact. Related content The renminbi could not rebalance China on its own https://www.capitaleconomics.com/publications/china-economics-update/renminbi-could-not-rebalance-china-its-own Little macroeconomic impact of horrific wildfires https://www.capitaleconomics.com/publications/europe-economics-update/little-macroeconomic-impact-horrific-wildfires

Group Chief Economist Neil Shearing unpacks another turbulent week for the global economy. He talks to David Wilder about the latest escalation in the US trade war, the economic fallout from rising tensions with Iran and higher oil prices and why the AI investment boom continues to reshape growth in the US and China. Trade war: What's behind the Trump administration's latest tariff announcements and why global trade has remained surprisingly resilient. Shooting war: After oil $100 a barrel again, what are the implications for inflation and central banks if tensions in the Middle East continue to escalate? AI boom: How AI investment is now the major driver of growth in both the US and China, and what happens if the boom turns to bust? Related content Fed preview: Rate hikes coming, but not until September https://www.capitaleconomics.com/publications/us-fed-watch/rate-hikes-coming-not-until-september Bank of England preview: BoE to hold rates as energy prices keep rate hikes in play https://www.capitaleconomics.com/publications/boe-watch/boe-watch-boe-hold-rates-energy-prices-keep-rate-hikes-play What is the future of US tariffs? https://www.capitaleconomics.com/publications/global-economics-update/what-future-us-tariffs

The collapse of the US-Iran ceasefire has triggered another spike in oil prices and put markets back on edge. Neil Shearing joins David Wilder to discuss whether the world is heading for another oil shock and what it would mean for growth and inflation. He also explains how Kevin Warsh's warning that the Fed has "no tolerance for persistently elevated inflation" could translate into policy. Also on the show, Julian Evans-Pritchard unpacks China's disappointing Q2 GDP figures, including the role AI is playing in shoring up activity, explains why the People's Bank of China isn't more concerned about slowing credit growth and discusses what to expect on the stimulus front. Related content The implications of a renewed closure of the Strait https://www.capitaleconomics.com/publications/global-economics-update/implications-renewed-closure-strait Global Economic Outlook: US strength points to renewed policy divergence https://www.capitaleconomics.com/publications/global-economic-outlook/us-strength-points-renewed-policy-divergence-0 UK Drop-In: The Burnham government – will policy ambition collide with economic reality? https://www.capitaleconomics.com/events/uk-drop-burnham-government-will-policy-ambition-collide-economic-reality Why Burnham will struggle to revive UK growth https://www.capitaleconomics.com/publications/uk-economics-focus/why-burnham-will-struggle-revive-uk-growth

It's far too soon to be worrying about another spike in inflation from renewed fighting in the Middle East. That's one of the key messages from Capital Economics' Global Chief Economist Jennifer McKeown, who joins David Wilder on The Weekly Briefing with Neil Shearing away this week. Jenny explains what could drive the Fed to raise interest rates as early as September, whether economies on both sides of the Atlantic can continue to hold up and where we think the consensus is wrong on the outlook for interest rates. Also on the show, in an exclusive excerpt from a recent online client briefing on AI, Chief Economic Adviser Vicky Redwood explains where the technology's impact is already showing up in the data, and what happens to the global economy if AI's promised productivity gains never materialise. Related content Capital Economics Key Issues: AI Drop-In: AI's global shockwaves – Macro and market implications

For the past three years, our Markets team has been more optimistic than most about the AI-driven rally in global equities. That view has been borne out by events. Now they believe the rally has entered its final phase and that a sharp downturn will follow. On this week's The Weekly Briefing , Chief Markets Economist Jonas Goltermann explains why we think the correction is coming in 2027, what to expect before the plunge and whether the Fed will play a role in the rally's demise. Also on the show, Climate and Commodities Economist Hamad Hussain discusses why our long-standing forecast that gold prices would retreat from their record highs is playing out, and why prices have further to fall from here. Related content: Drop-In: AI's global shockwaves – Macro and market implications Asset Allocation Outlook: The AI equity boom reaching its final innings https://www.capitaleconomics.com/publications/asset-allocation-outlook/ai-equity-boom-reaching-its-final-innings Commodities Outlook: Beyond Hormuz – the path back to an oil glut https://www.capitaleconomics.com/publications/commodities-outlook/beyond-hormuz-path-back-oil-glut

Our flagship Global Economic Outlook is just around the corner, and in this latest episode of The Weekly Briefing , Group Chief Economist Neil Shearing previews our view of a world in which some economies are benefiting from the AI investment boom while others are falling behind. He also discusses what to expect from next week’s US employment report and why markets are underestimating just how hawkish the Fed may need to remain to bring inflation back to target. Also on the show, with Andy Burnham’s 'coronation' as the UK’s next prime minister looking increasingly likely, what do we know about the new government’s plans? Paul Dales and Ruth Gregory from our UK team discuss the fiscal constraints that will limit a Burnham government’s spending ambitions, while explaining why falling inflation could allow the Bank of England to deliver much more monetary easing than markets currently expect. Related content UK Economic Outlook: Fall in inflation to 2.0% in 2027 to trigger rate cuts https://www.capitaleconomics.com/publications/uk-economic-outlook/fall-inflation-20-2027-trigger-rate-cuts Capital Economics Events https://www.capitaleconomics.com/events

A peace deal that's already showing signs of strain. Central bankers still wrestling with inflation. A new Fed chair seeking reform. And a UK local election with implications for the bond market. It’s been a busy week for macro and markets, and Group Chief Economist Neil Shearing joins David Wilder to make sense of it all. Neil explains what the increasingly fragile US-Iran peace deal means for global oil supplies and the outlook for inflation and interest rates. In his discussion, Neil reviews Kevin Warsh's first meeting as Fed chair, considers the outlook for US interest rates, examines mounting trade tensions between Europe and China, and explains why the UK's next prime minister may find fiscal promises difficult to keep.

Relatively strong US growth, sticky inflation and a resilient labour market have strengthened the case for further Fed tightening. In this week's episode of The Weekly Briefing , Chief North America Economist Stephen Brown tells David Wilder why rates may rise again before year-end and what to expect from Kevin Warsh's first meeting as Fed Chair. Before that, it's Groundhog Friday, as Donald Trump again talks up an imminent deal to reopen the Strait of Hormuz. But what if this time it really is for real and a US-Iran deal does get done? Group Chief Economist Neil Shearing discusses how the outlook could shift if energy starts flowing again, but also explains the economic risks if any deal later falls apart as crude reserves run down. Related content Fed on hold as Warsh faces a fractious FOMC BoE may not follow the central bank crowd in raising rates BoJ on track to hike despite Ueda’s absence

Are we moving towards Fed rate hikes? Even before the release of a strong May US employment report, Group Chief Economist Neil Shearing joined The Weekly Briefing to explain why shifting dynamics on the FOMC mean the Federal Reserve could emerge from the summer weighing the need for tighter policy to contain inflation. Plus, after another extraordinary surge in AI stocks, Chief Economic Adviser for Financial Markets John Higgins discusses how much further the rally could run, whether current earnings growth is sustainable and what could ultimately burst the stock market bubble. Related content Bar to Fed hikes appears relatively low Capital Economics events

This could prove another false dawn, or the US and Iran could finally reach an agreement to reopen the Strait of Hormuz to oil and gas shipments. But even if the strait reopens, energy flows, oil prices and, by extension, inflation won’t snap back quickly to pre-war levels. Group Chief Economist Neil Shearing and Chief Climate & Commodities Economist David Oxley join the latest episode of The Weekly Briefing to discuss the new normal for global energy markets and what it means for the world economy. They explain why inflation pressures are still likely to build in the weeks ahead, even as market expectations for central bank responses have tempered in recent days. And they discuss how governments and the energy industry are now scrambling to build alternative supply routes and reduce the Strait of Hormuz’s potency as a geopolitical choke point.

This latest wobble in the bond market almost certainly won’t be the last. Group Chief Economist Neil Shearing and Chief Markets Economist Jonas Goltermann join David Wilder on the latest episode of the Weekly Briefing to discuss the forces that have driven bond yields to multi-year highs. They examine shifting perceptions around inflation as the closure of the Strait of Hormuz drags on, the fiscal worries gnawing away at investor sentiment across the advanced economies and we're entering a world where inflation settles structurally higher than the 2% era policymakers once took for granted. And with Japan’s yield curve steepening sharply, they also discuss whether investors are beginning to question the Bank of Japan’s grip on reflation. Also on the show, India economist Shilan Shah calls in from Mumbai to discuss how record temperatures and the global energy shock are complicating the Reserve Bank’s efforts to contain inflation pressures. He discusses the risks7 facing the rupee, the prospect of tighter monetary policy, and how the current dilemma compares with crises past. Related content Watch: Markets Drop-In: AI-driven paradigm shift or dotcom bubble redux? What’s next for equities https://www.capitaleconomics.com/events/markets-drop-ai-driven-paradigm-shift-or-dotcom-bubble-redux-whats-next-equities Read: Heatwave completes trifecta of risks for India https://www.capitaleconomics.com/publications/india-economics-update/heatwave-completes-trifecta-risks-india Explore: Fiscal Risks https://www.capitaleconomics.com/key-issues/fiscal-risks

Westminster is gripped by the game of thrones around Labour's slow-mo leadership drama, which could deliver the UK's seventh prime minister in ten years. But for markets and the economy, the stakes are very real. Chief UK Economist Paul Dales tells David Wilder why. He says all the leading contenders to replace Starmer would, to varying degrees, open the spending taps but also explains why the bond market is likely to push back hard. Paul also makes the case for the UK's medium-term outlook looking brighter than many assume, though not because of who's in charge of the country. Also on the show, Group Chief Economist Neil Shearing discusses why the latest activity data suggest the global economy has so far proved surprisingly resilient in the face of the Iran conflict – and why that resilience could soon be tested.

Donald Trump travels to Beijing next week for a long-awaited summit with Xi Jinping that carries huge geopolitical significance, but one where investors should keep expectations firmly in check. Group Chief Economist Neil Shearing and Head of China Economics Julian Evans-Pritchard join David Wilder to assess the state of the US-China relationship and why any apparent thaw in tensions may prove superficial. They discuss issues including: Why Beijing increasingly sees the US as a power in relative decline, and how that is shaping Chinese strategy; Why the structural forces pushing the US and China apart are likely to outlast any short-term diplomatic reset; What’s driving the recent improvement in China’s economy, and how that could exacerbate global tensions. Also on the show, Chief Europe Economist Andrew Kenningham returns from client meetings in Germany to explain why those who had been expecting an economic turnaround last year have been left disappointed, but to also argue that the prevailing gloom around both the German economy and its politics has become excessive. Related content: Read: What would a new PM mean for the UK economy and markets? https://www.capitaleconomics.com/publications/uk-economics-update/what-would-new-pm-mean-uk-economy-and-markets Register: Drop-In: Is the energy shock supercharging the Chinese export boom? https://www.capitaleconomics.com/events/drop-energy-shock-supercharging-chinese-export-boom Read: Taking stock of the German fiscal stimulus https://www.capitaleconomics.com/publications/europe-economics-update/taking-stock-german-fiscal-stimulus Read: Fiscal stimulus won’t fix Germany’s economy https://www.capitaleconomics.com/publications/europe-economics-focus/fiscal-stimulus-wont-fix-germanys-economy

A day after Brent crude surged above $120 per barrel, Group Chief Economist Neil Shearing and Deputy Chief Emerging Markets Economist Jason Tuvey discuss how long the conflict in the Middle East could continue and why Iran’s collapsing economy is not a reliable guide to when the regime might capitulate. Speaking with David Wilder, they also explore how central bankers are navigating the inflation risks posed by a prolonged disruption to energy supply, as well as what the UAE’s departure from OPEC could mean for oil markets and what it signals in a world of intensifying US–China competition. And in a packed week for equities investors, Chief Markets Economist Jonas Goltermann assesses how key Big Tech earnings reports have landed and explains why bonds have not been performing nearly as well as equities. Related content Read: How long can Iran hold out? https://www.capitaleconomics.com/publications/middle-east-north-africa-economics-update/how-long-can-iran-hold-out Read: Forecasting through the fog of war https://www.capitaleconomics.com/publications/global-economic-outlook/forecasting-through-fog-war-1

The Iran conflict is approaching its third month, the Strait of Hormuz remains closed and oil is back above $100 per barrel. How safe is the assumption that this will all be resolved soon, and what happens to commodity prices, growth and inflation if it isn’t? In the latest episode of The Weekly Briefing , Chief Global Economist Jennifer McKeown and Chief Climate & Commodities Economist David Oxley join David Wilder to unpack the macro and market assumptions behind our ‘adverse’ conflict scenario. They discuss how far commodity prices could rise and whether that risks tipping the global economy into recession – but also why some of the latest data suggest the initial macro hit from the energy shock may not have been as severe as first feared. Also on the show, the upcoming Federal Reserve meeting could mark Jerome Powell’s final one as Chair. With Kevin Warsh waiting in the wings, Chief North America Economist Stephen Brown considers Powell’s legacy, but also the policy implications of a change in Fed leadership. That includes why Warsh could push for a different inflation gauge to target, but also why tensions with the White House may not go away. Related content Read: Powell’s departure upstaged as Warsh readies Fed revamp https://www.capitaleconomics.com/publications/us-fed-watch/powells-departure-upstaged-warsh-readies-fed-revamp Drop-In: The Fed, ECB and Bank of England – Signals from the April meetings https://www.capitaleconomics.com/events/drop-fed-ecb-and-bank-england-signals-april-meetings Iran conflict: Global macro and market implications https://www.capitaleconomics.com/key-issues/iran-conflict

Global imbalances are back. But how serious is the threat this time, and could they trigger the next phase of global economic instability? Group Chief Economist Neil Shearing joins David Wilder to unpack what is driving balance of payments positions to worrying extremes, why a more fragmented and volatile world raises the stakes, and why Donald Trump and Xi Jinping are unlikely to take meaningful steps to address these tensions when they meet next month. Also on the show, Deputy Chief EM Economist Jason Tuvey examines the economic shock hitting Gulf economies as a result of the Middle East conflict, and what it means for their long-term development ambitions. Related content Drop-In: China’s shock to the eurozone – economic fallout and policy choices https://www.capitaleconomics.com/events/drop-chinas-shock-eurozone-economic-fallout-and-policy-choices Can China’s trade surplus rise further? https://www.capitaleconomics.com/publications/china-economics-update/can-chinas-trade-surplus-rise-further War dealing a heavy blow to the Gulf economies https://www.capitaleconomics.com/publications/middle-east-north-africa-economics-update/war-dealing-heavy-blow-gulf-economies