- UK headline inflation nudges up away from target, rising 2.2% but not by as much as expected.
- Energy bills fell by less than they did in July last year, which mainly prompted the rise.
- Hotel room prices fall, as the Taylor Swift effect eases off.
- US producer price inflation rises by less than expected, prompting a relief wave over markets.
- Oil prices head higher, following sharp drawdown of US stocks and ongoing geopolitical conflict.
- Nikkei erases gains after the Prime Minister announces he won’t stand for another term.
- Flutter’s bets on opportunities in the US market are paying off as it triples Q2 net profits.
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
‘’UK inflation has not yet been tamed, veering away from target but not by as much as feared. The effects of energy price changes, with bills falling by less than July last year was the main driver upwards. But the Bank of England will be encouraged by the direction of travel for core inflation, which strips out volatile fuel and food prices as it dipped to 3.3% from 3.5%. The pound dropped a little against the dollar from $1.285 to $1.282 as bets increased slightly on further rate cuts this year. However, with prices still more unruly, Bank of England policymakers are still set to sit on their hands in September and are not expected to cut rates until November. However, a second reduction by the end of the year now looks more likely. The Taylor Swift effect also appears to have a slight hand in these figures, as the main downwards pressure on inflation was a fall in hotel room costs from June, when she was on her UK tour. Pop star Pink’s UK appearances also saw spikes in prices in some cities in June. It now seems more unlikely that the surge-pricing effect will turn into a recurrent inflationary pressure, as it clearly depends on the brightness of the stars.
In the US, inflation is still heading in the opposite direction, downwards, with producer price rises coming in lower than expected, prompting a relief wave to ripple through financial markets. Concerns about what this may indicate about a slowing US economy are mere undercurrents, with the focus firmly on the potential for Fed interest rate cuts. The focus has now switched to the CPI data due out today, but the producer prices were a welcome tit-bit, taken as an indication that rate cuts will come in quick succession this Autumn. Brent Crude has edged up again above $81 a barrel, after US crude stockpiles fell more sharply than expected, but also supply concerns are being kept alive by the highly tense situation in the Middle East.
The Nikkei has erased gains after the news that Prime Minister Fumio Kishida will not run for a second term following a string of scandals which has engulfed his party, including allegedly siphoning political funds to lawmakers. But the weakness of the yen has been of mounting concern, questions have been raised about his economic leadership and the dramatic market volatility which hit last week, won’t have helped. Even though he’d faced calls to resign, the announcement sparks uncertainty, which has unsettled investors. He has said he is stepping down to present his Liberal Democratic Party, as one that has changed.
The first results from Paddy Power and FanDuel owner Flutter, since switching its primary listing from the LSE to the NYSE will provide a boost to investor confidence. Earnings beat expectations, led by strong growth in its US business, with net income more than tripling. Income rose by 39% in the US, with FanDuel sailing past the $1 billion mark in revenues from its sportsbook. Its brands in the UK and Ireland were also boosted by a surge of activity during the Euros with 2.8 million customers placing bets. Some of them were probably washed down by a few pints after data from Kantar showed that £10m worth of beer was bought on the day of the final.”
