The race to become the new Conservative Party leader heated up last week with the first vote taking three casualties. Furthermore, Matt Hancock withdrew, meaning that there are now six in contention. Boris Johnson has taken a strong lead and is highly likely to be the first name on the ballot when it goes out to the Conservative Party membership and, as a result, the contest between the remaining five has become about who is the best alternative. The vast majority of candidates have taken a harder line on Brexit than Theresa May, with many promising that they will leave the EU in October, deal or no deal. As ever, markets are still no more certain than they have been over the last three years as to what the ultimate outcome of Brexit will be.

 Oil Tankers Attacked

The oil price jumped on Thursday as news of a coordinated attack on two oil tankers in the Strait of Hormuz increased fears of supply disruptions. The US military was quick to assign blame to Iran and released video evidence as support. The Strait of Hormuz is critical for the transport of large amounts of oil from key producers such as Iraq, UAE, Qatar, Bahrain and Saudi Arabia. Therefore, any disruption to shipping in the area would have a significant impact on the global supply of oil, causing upward pressure on the price. So far, there has been no escalation; however, a programme of attacking civilian vessels by Iran would inevitably lead to repercussions from the US. With already heightened tensions in the region, the threat of war has increased significantly over the last few months.

 UK Economic Data

A raft of UK economic data for the UK was released last week. GDP figures for April showed that the economy contracted significantly month-on-month as the country prepared itself for the Brexit that didn’t happen, closing factories or slowing production. Economists, therefore, believe that there would be a rebound in May as some of this effect was reversed. Employment figures released last Tuesday showed that in April jobs continued to be created, although at a slower speed than previously. Nevertheless, wage growth accelerated, increasing to 3.4% (excl. Bonus), well ahead of inflation. As labour market conditions remain tight, with unemployment at 3.8% and job vacancies elevated, this trend should continue.

Market Data