- UK GDP contracts, but not as much as feared
- Slight dip from US markets after rallies earlier in the week
- Brent crude set to end the week nearly 5% higher at $99 per barrel
- Gold on track for fourth straight weekly rise
Matt Britzman, Equity Analyst at Hargreaves Lansdown
“The latest UK GDP print shows a 0.6% drop in output in June, marking the biggest contraction since January 2021, but far less severe than markets had feared. Though the overall tone of the data was better than expected, it still points to weakness in various sectors. Output in consumer-facing services was flat, but remains 4.9% below pre-pandemic levels with the sector having some of the most exposed businesses to the growing cost of living crisis.
US markets had a mooted response to Thursday’s US producer price print that shows prices declined in July for the first time in over two years. The S&P500 closed fractionally down while the tech heavy NASDAQ reversed gains earlier in the session to close 0.6% down. Tech investors look to have taken some chips off the table and cash in on gains from the rally earlier in the week. Supportive data fuels a case that inflation could well have peaked, but a recession is very much still on the horizon and many of the reasons for downward pressure on equities are still in play.
Brent crude prices pushed higher over Thursday and into Friday, approaching the $100 per barrel mark, as both supply and demand side factors act as a catalyst for prices. The closure of six oil and gas fields in the Gulf of Mexico gave a hit to supply, as leaks at a Louisiana booster station halted two pipelines. On the demand side, the International Energy Agency raised its forecast for global oil consumption this year as surging natural gas prices and heatwaves incentivise a switch to the cheaper oil for power generation. The group also suggested OPEC+ was unlikely to raise output in the coming months by any significant amount. Though prices are still well below the highs seen earlier this year, consumers are only just starting to see benefits at fuel pumps and any meaningful movement back over and above the $100 per barrel mark will give ammunition to keep prices up.
Gold prices are on track for a fourth straight week of gains, pushing up from a yearly low of $1694 an ounce to above $1790 over the past few weeks. The precious metal’s been a benefactor of global uncertainty as investors have moved into the safe haven asset in light of simmering tensions between China and the US over Taiwan. Gold’s US dollar denomination meant it’s also been a benefactor of the lower-than-expected US inflation print for July, as markets become more confident of a 50-basis point rate hike in September versus earlier speculation of a 75-point rise.”
