<p>European politics is back to its old tricks. Just when you thought the Continent was settling down, two governments started disintegrating over a weekend.</p> <p>A recent market mantra has been the muted effect of politics on asset prices. That always seemed a bit of a stretch, considering the movements in currency markets and the bull-run of US equities set off by a change in US taxes. It could be said that the steady rise in US Treasury yields were driven in large part by this change in the US political environment. Now ructions in Europe have put the “end of politics” claim to bed.</p>

<p>American company earnings grew 20% in the second quarter, relative to a year ago, and profit margins are at record levels.</p>

<p>The UK was the biggest loser in a tough quarter for global equity markets.</p> <p>Despite a wave of bad news for many of the US technology giants, the S&amp;P 500 was the strongest major developed market in local currency terms over the past three months. Worries about rising inflation and faster interest rate hikes were compounded by America’s belligerent trade policy, causing sharp share price falls around the world.</p>