UK markets made strong gains this week, with the FTSE 100 Index rising by 1.75% to trade at 10,600 points at the time of writing.
Andy Burnham has committed to upholding “rock solid” UK public finances if he becomes Prime Minister, saying that he was frustrated by claims that he would let borrowing rip. Seeking to reassure the City of London that he will run a tight ship, he told LBC’s Andrew Marr, “Overall people can be certain of one thing of me; I am not indisciplined on the public finances”.
Last year Burnham rattled some city investors when he said Britain should not be “in hock” to the bond markets, but he has since committed to upholding the government’s fiscal rules. He told LBC that he had previously been a Treasury minister in Gorden Brown’s government and had run the Department of Health, so he has experience of managing budgets.
Assuming that no last-minute candidate emerges to challenge Burnham for the Labour leadership, he will succeed Sir Keir Starmer as Prime Minister on July 20th. Alongside his promise to keep borrowing under control, Burnham went further by insisting that he would uphold Labour’s 2024 tax promises not to increase the rates of income tax, employee national insurance and value added tax, as well as the main rate of corporation tax.
Burnham has his own spending proposals, including a promise of more council houses and more public control over water, energy and transport to reduce bills and fares. He said savings would be found in the welfare budget but suggested that could take time. He has talked about reforming vocational training, providing job guarantees for young people and free bus travel for 16 to 18-year-olds to help them get to work.
The Treasury will tell Burnham within days that the Iran war has done less damage to the UK’s public finances than initially feared, dealing only a modest hit to the £23.6 billion headroom built up by Chancellor Rachel Reeves.
Elsewhere, UK house prices rose in June, according to lender Nationwide, as recent falls in energy prices softened interest rate expectations and helped to restore buyer confidence. The annual rate of house price inflation increased to 2.2% in June from 1.7% the previous month. A Reuters poll of economists had forecast a year-on-year increase of 2.4%. The latest move takes the average property price to £277,484.
The ceasefire between the US and Iran has helped to push down oil prices, reducing the likelihood that the Bank of England will need to raise interest rates which underpin fixed rate mortgage pricing. The average two-year fixed-rate mortgage was 5.53% on Tuesday, up from 4.83% at the start of March, according to finance website, Moneyfacts.
Despite the pick-up in annual house price inflation, prices were broadly flat compared with the previous month after taking into account seasonal effects, according to the Nationwide index, which is the earliest market indicator.
Commodity markets
In the commodity markets, Brent crude futures traded around $72 per barrel on Friday and are set to end the week little changed after Qatar said the US and Iran made “positive progress” during indirect talks.
Mediators from Qatar and Pakistan concluded separate meetings with US and Iranian negotiators in Doha on Wednesday, said a spokesperson for Qatar’s foreign ministry on social media. Positive progress was made on issues related to the memorandum of understanding, the spokesperson said. Indirect talks between the US and Iran began in Doha on Tuesday, with US special envoy Steve Witkoff and Jared Kushner holding talks through Qatari mediators rather than meeting Iranian officials face-to-face.
The renewed diplomatic push follows a flare-up in hostilities over the weekend that threatened a 60-day ceasefire between the two countries. Iran attacked two commercial vessels, prompting retaliatory US strikes on targets inside Iran. Investors are increasingly pricing in the possibility that tensions could ease if negotiations continue to make progress, reducing concerns over potential disruptions to Middle Eastern oil supplies.
ING Group said the market remains optimistic that oil supplies from the Persian Gulf will normalise despite recent military flare-ups, helping explain why Brent has suffered its worst quarter since early 2020. Commercial shipping through the Strait of Hormuz has continued to recover, with crude exports from Saudi Arabia climbing back to 90% of their pre-war baseline, matching a strong supply rebound in the United Arab Emirates. Iraq is likewise showing tentative signs of shipping recovery, while a sizable inventory of Iranian oil continues to accumulate at sea.
Gold prices traded around $4,175 an ounce on Friday and are on track for their first weekly gain since late May, as investors scaled back their bets on the Federal Reserve hiking rates in September.
Equity markets
US equity markets were closed on Friday in observation of Independence Day. In Thursday’s regular trading session, the Dow Jones Industrial Average rose 1.14%, the S&P 500 was unchanged, whilst the Nasdaq Composite lost 0.8%.
The US economy fell short of Wall Street expectations to add 57,000 jobs in June as the labour market cooled and a World Cup hiring spree petered out, prompting investors to scale back expectations of interest rate rises.
Thursday’s figure from the Bureau of Labor Statistics marked a sharp fall from the downwardly revised 129,000 jobs added in May and was less than half of the 115,000 predicted by economists in a Bloomberg poll. The April hiring figure was also revised down to 148,000, representing a combined 74,000 job reversal in April and May.
June’s job gains were the weakest this year, with the exception of a weather driven decline in February, marking a significant cool-down in the labour market after three months of bumper hiring. Despite the drop, job growth remained well above the 10,000 jobs added each month on average in 2025. The June unemployment rate ticked down to 4.2% from 4.3% in May, as more people left the labour market.
The Dollar slid following the release of the jobs data as investors reined in their expectations of near-term action by the Federal Reserve. Investors are now expecting the US central bank to lift borrowing costs by December rather than October. June hiring was dragged down by a drop-off in jobs in the leisure and hospitality sector following a boost in recent months from the Fifa World Cup, which is being hosted in cities across the US.
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