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

The latest Weekly Briefing covers the global outlook, financial markets and energy. Group Chief Economist Neil Shearing explains what the ceasefire in the Middle East means for growth and inflation, how quickly the world economy could recover if it holds, and what happens if fighting resumes.

James Reilly, a Senior Economist on our Markets team, joins to run through updated forecasts for equities and bonds, why markets have held up relatively well, and why the stock market highs expected before the war now look out of reach.

Plus, in an exclusive clip from a recent client briefing, our Climate & Commodities team explain why restoring oil supply is not as simple as flicking a switch, and the constraints on refined product output.

Related

Iran conflict: Global macro and market implications
https://www.capitaleconomics.com/key-issues/iran-conflict

Watch: How the Middle East conflict has changed the price outlook
https://www.capitaleconomics.com/events/commodities-drop-how-middle-east-conflict-has-changed-price-outlook

Mapping the next stage of the AI rally
https://www.capitaleconomics.com/publications/equities-focus/mapping-next-stage-ai-rally

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The AI hype cycle shows no sign of slowing. But how much are the hundreds of billions in investment actually boosting economies, and when will that spending translate into meaningful productivity gains?

In this episode, Senior Economic Adviser Vicky Redwood discusses her new report, 'How deeply is AI taking hold in the economy?', the latest addition to Capital Economics’ analysis of AI’s global impact. In conversation with David Wilder, she separates hype from reality, covering:

• Which economies are benefiting most from the global AI build-out
• Why recent US productivity gains are evidence of AI’s impact
• If the conflict in the Middle East could disrupt the AI rollout
• Whether fears of an AI-driven jobs apocalypse are justified
• What the Citrini note gets wrong about AI’s macro impact

Read 'How deeply is AI taking hold in the economy?': https://www.capitaleconomics.com/publications/global-economics-focus/how-deeply-ai-taking-hold-economy

Our updated macro and market forecasts assess the impact on growth and inflation – and the likely central bank response – under both baseline and adverse scenarios for the Middle East conflict. In the latest episode of The Weekly Briefing from Capital Economics, Group Chief Economist Neil Shearing discusses why the more benign scenario would deliver a negative but manageable shock to the global economy, while a more adverse outcome could tip it into outright recession.

Also on the show, Deputy Chief UK Economist Ruth Gregory explains why gilts have been the hardest hit among G10 government bonds as tensions have escalated. She explores the sharp shift in expectations for Bank of England policy and the underlying fiscal vulnerabilities fuelling market anxiety – including the risk of a change in government leadership.

Read our latest Global Economic Outlook: https://www.capitaleconomics.com/publications/global-economic-outlook/forecasting-through-fog-war-1