19 May 2026
Last week official figures showed slight economic growth in the first quarter, but more recent data reveals a sharp drop in consumer spending. Hit by the Middle East energy shock, April retail sales fell sharply, and card spending recorded its first annual decline. Forecasters warned that the broader geopolitical fallout could cost the economy over 160,000 jobs. This accelerated this week, as data shows household sentiment plunged to its weakest level in nearly three years. Troubles in Westminster are impacting corporate planning with 39% of British firms delayed or cancelled investments due to policy uncertainty. This was backed by new surveys indicating a noticeable drop in job postings, as well as one in five employers planning to reduce their overall workforce.
Fiscally, Chancellor Rachel Reeves' headroom has shrunk to the point of being forced into defensive moves. Reeves is now expected to scrap a planned 5p increase in fuel duty to help with living costs, despite losing key government revenue. The Treasury is also pivoting to zero-cost levers by relaxing post-2008 bank ring-fencing rules. This deregulation will allow major lenders to share services, highlighting the government's attempt to boost lending and keep the economy growing. With borrowing costs spiralling, the Bank of England ("BoE") faces pressure to stop their aggressive bond-selling programme. Their policy committee remains completely split on its rate path.
In the markets, investors are starting to lose confidence in British assets as political and economic risks are getting priced into sovereign debt leading to institutional anxiety which drove 30-year Gilt yields to their highest levels since 1998. Currency traders also placed bearish bets against Sterling, and major asset managers like Aberdeen sold down their £10 billion UK bond portfolio.
Across the pond, major US equity indices reached record highs, driven by further AI exuberance and solid tech earnings. However, the rally hid underlying fragility. Gains were driven by larger companies, whilst small-cap stocks and consumer discretionary sectors struggled with persistent inflation and high energy costs. Treasuries weakened significantly across the curve following soft auctions, pushing yields higher, and a stronger dollar actively pressured gold. Meanwhile, crude oil surged amid ongoing geopolitical gridlock. President Trump’s summit in Beijing brought no major breakthroughs. The administration maintained a firm stance on the Middle East, cancelling planned talks with Iran. The UK housing market is sending mixed signals as there are still high mortgage rates and worsening consumer sentiment. Even though Rightmove reported a rise in May asking prices, underlying activity is contracting. The Royal Institution of Chartered Surveyors ("RICS") recorded the weakest housing sentiment since 2023. This was driven by sharp declines in buyer enquiries and agreed sales. New home builds have also plunged to a 14-year low. Housebuilders are abandoning land purchases as a result, threatening government construction targets with no current improvement in sight.
Intertek Group, which focuses on multinational assurance and testing services, saw its share price surging by 14.36% this week. This was after the board indicated it is ready to accept a £10.6 billion takeover bid from private equity firm EQT. Following pressure from major shareholders to engage, the board paused its independent strategic review to evaluate this final offer. Sentiment improved amongst investors viewing the potential buyout as a massive win for shareholders. Whilst the stock price jumped, it still trades slightly below the proposed offer price. Investors are showing typical market caution as they wait for final due diligence to clear.
British American Tobacco, a UK-based tobacco company, rallied 13.99% this week. With very few direct news flows from the business, the stock largely benefited from a positive week for the broader FTSE100. In the markets, investors are gravitating toward the company's defensive traits and reliable earnings. The market remains confident in the firm's ongoing business transition. Strong sales growth in smokeless products continues to offset the drop in traditional cigarette sales.
3i Group, a private equity company, saw its shares tumbling 14.67% this week as investors panicked over a noticeable sales slowdown of its biggest holding, Action. With consumer confidence in key markets such as France and Germany having no current improvement in sight, Action's previously explosive growth decelerated. Recent geopolitical shocks also did not help. Since Action drives most of the returns for 3i, the market sold off and sent 3i’s shares to a multi-year low. Management is trying to get a grip on the situation by launching its first share buyback programme in over two decades. This was done to stop the bleeding and restore confidence, helping the stock recover slightly from its worst levels.
Market Commentary prepared by Walker Crips Investment Management Limited.
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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.
