The calm before?

The Morning Message

Morning all.

For those of you that eagerly restored your fans to the cupboards, too hasty. Temperatures expected to peak on Wednesday, somewhere between 30-35C.

Big day today for Barclays, GSK, Unilever and BetMGM as they all release earnings updates. Bank lending teams should be supported by higher interest rates but we'll be keeping an eye on borrower default rates and the impact on investment banking teams. Unilever's results should provide a window into the impact on UK consumer spending.

Over the course of this week, we'll be starting to piece together a view on where corporate Britain is right now.

Markets

The Number

30-35C

Temperatures anticipated for Wednesday as the UK is expected to enter another heatwave.

The Big Story

The US presses pause: but for how long?

Bank of England officials will have welcomed the prospect of one inflationary headache easing. The question is whether the relief will last.

Oil prices fell sharply after President Trump paused US strikes on Iran, with Brent crude dropping below $90 a barrel after briefly exceeding $100 last week. That offers central bankers some respite before Thursday's interest-rate decision. But the wider conflict still affects two of the world's most important shipping routes: the Strait of Hormuz and, following Houthi attacks on Saudi-linked vessels, the Red Sea passage through Bab al-Mandeb.

The Bank of England is expected to hold rates at 3.75%. The more difficult question is what comes after. While a short-term fall in energy prices will temporarily ease inflationary pressure, a more sustained rise thereafter could feed through into transport, food and household bills, making inflation harder to contain and raising the prospect of rate increases later this year.

Trump's pause has calmed markets, but there is little evidence yet that it represents anything more lasting. Washington is still preparing for the possibility of a longer campaign: Defence Secretary Pete Hegseth recently asked senators for tens of billions of dollars in additional funding. Nor has Trump publicly abandoned his objectives in Iran.

Military analysts have warned from the outset that air strikes alone are unlikely to bring about regime change. Robert Pape, a military historian, argues that Washington will ultimately be left with a binary choice: escalate or retreat.

Either option carries political risks. Americans remain scarred by Iraq and Afghanistan, making another open-ended conflict difficult to sell. For now, the pause gives central bankers some light relief. But they will know that oil markets, and the inflation outlook, can turn quickly.

The Boardroom

AstraZeneca in rude health

AstraZeneca kicked off a week of FTSE earnings releases with a healthy set of results. First-half revenue rose 9% to $30.7bn, while core earnings per share climbed 12% to $5.21.

The company reaffirmed its full-year guidance, with management still expecting mid-to-high single-digit revenue growth and low double-digit growth in core earnings.

The RNS notes that AstraZeneca has lost US exclusivity for its diabetes drug Farxiga and continues to face pricing pressure in China. However, strong performances in oncology and rare diseases helped offset those challenges, while the company also highlighted a steady stream of new drug approvals and positive late-stage clinical trial results. Management remains confident it can generate $80bn of annual revenue by 2030.

Around the World

Thousands evacuated from Gironde

Wildfires in Southern France continue to rage, with unprecedented fire storms making the outbreak even more unpredictable.

French authorities report that thousands have been evacuated from the Gironde region near Bordeaux. While wildfires have been seen before in France, the clouds developing above the fires haven't.

These so-called fire thunderstorms make the wildfires even more unpredictable and can themselves generate more fires.

The fires follow an extended hot spell across Europe, which has created severe drought. This, coupled with strong winds and persistent heat, has caused the fires to spread quickly. The clouds developing above the fires have created a new logistical nightmare for the teams trying to bring things under control.

Quick Hits

The Take

The President is the Commander-in-Chief, but when it comes to matters of war, Congress has the power of the purse.

America had been attacked and although al-Qaeda was more a network than a singular base, Bin-Laden was believed to operate from Afghanistan. Iraq was predicated on the argument that America was under imminent threat. In both cases the sense of a recent or impending threat was key to Congress buying into the invasion.

While the war has been protracted the attacks on Iran's nuclear facilities were successful. And Donald Trump was not shy when it came to telling people. Without an actual or imminent threat, it will be harder for Congress to approve funding for a ground invasion.

At a recent talk, the historian Peter Frankopan said that wars generally happen because a country overestimates an external threat or underestimates its opponent. Critics say Trump is guilty of the second mistake. Unless Congress seriously believes the US is in danger or suffers casualties on a meaningful scale, it will be harder for the President to escalate to a ground invasion if that is his ultimate goal.

Which might keep us in deadlock for a while longer.

Before You Go

That's it. Hope Monday was kind and you've got a spring in your step. Wednesday is expected to be the hottest day so make the most of the (relatively) moderate temperatures while you can.

Until tomorrow,
Sean