Wall Street took its lead from the FTSE 100 (^FTSE) and European stocks on Wednesday as inflation across the US economy slowed to its lowest in over three years.
The annual US CPI inflation rate rose by 2.9% in the year to July, down from 3% in June. That’s the smallest 12-month increase in prices since March 2021.
On a monthly basis, prices rose by 0.2%, following a 0.1% fall in June.
Money markets now indicate a 45% chance that Threadneedle Street will cut to 4.75% next month, down from its current level of 5%, and a 55% chance that borrowing costs remain unchanged.
Before Wednesday morning’s inflation data, a September rate cut stood at a 36% probability, according to City pricing.
Consumer prices index (CPI) rose for the first time this year to 2.2% in July, up from 2% in both May and June, according to the Office for National Statistics (ONS). This was less than the 2.3% rise expected by analysts.
London’s benchmark index closed 0.4% higher, touching a two-week high during the session, as all sectors gained apart from industrial metal miners.
Germany's DAX (^GDAXI) rose 0.2% and the CAC (^FCHI) in Paris headed 0.5% into the green.
Garry White, chief investment commentator at Charles Stanley, said: "US inflation data was bang in line with market expectations, showing only a modest increase in July. This data is likely to cement prospects of an interest rate cut at the Federal Reserve’s September meeting.
"Markets had been fretting that the US central bank was behind the curve with interest rate cuts and a sharp slowdown or recession was likely as a result.
"We think these concerns were over-exaggerated and a soft landing is still in prospect for the world’s largest economy. The US jobs market remains robust, if slowing, and the recent correction in technology-sector valuations was a healthy event."
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LaToya Harding
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Well that's all we have time for today, thanks for following along. Be sure to join us again tomorrow when we'll be back for more of the latest markets news, and all that's happening across the global economy.
Today's top headline was news that US inflation fell to 2.9%. Traders remain certain that the Fed will now begin cutting interest rates at its next meeting in September but are still divided on whether this will be by half a percentage point or a quarter of a point.
We will leave you will a comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
"Today’s US inflation figure clears the runway for the Federal Reserve to initiate a rate cut at its September meeting. The 2.9% reading is just under expectations of 3pc, while core inflation has remained stable at 3.2%.
"The last thing the Fed and the market will have wanted prior to the next meeting was any surprises in the data, and while some may still appear, inflation is at least playing ball and that is the most important data point to consider still.
"Clearly there is some concern that the economic slowdown in the US is more severe than is currently being presented by the data. This has caused market jitters of late, but investors should be calmed knowing that rate cuts are coming."
Have a good evening!
LaToya Harding
Tat Motors higher ahead of quarterly results
Shares of Tata Motors (TATAMOTORS.NS) closed higher in India ahead of the car manufacturer’s quarterly results.
Tata Motors' revenue growth for the quarter is expected to be bolstered by strong volume increases in its JLR (Jaguar Land Rover) and Commercial Vehicle segments, despite a weaker performance in the PV Passenger Vehicles sector.
Revenue is projected to increase by 6% year-on-year, based on the average estimates from brokerages, figures first reported in local media. Net profit is expected to grow by 48% year-on-year.
The company, India's largest electric vehicle (EV) player in India, also received a boost in trading amid reports that the country is set to announce new measures to increase EV adoption.
John Lewis is to cut 153 jobs as part of a shake-up of its store teams designed to improve customer service, it has been revealed.
The department store chain said the proposals will ensure that workers “are in the right place, doing the right tasks at the right time”, and therefore increase the time staff can spend face to face with shoppers.
The retailer said it hopes the job cuts, which will affect 1% of its workforce, will be met through voluntary redundancy and natural attrition.
It will also make a multimillion pound investment in technology to improve its service for customers in shops.
As part of this, John Lewis will invest £5m in digital headsets for store workers to communicate better with one another.
Peter Ruis takes over as John Lewis executive director in January and former Tesco UK boss Jason Tarry becomes chairman of parent firm, the John Lewis Partnership, early next year.
A spokesman for John Lewis said:
“We’re seeking to make sure partners are in the right place at the right time to help customers.
“We’re also removing unnecessary tasks and introducing new technology to make their roles easier.
“We carried out similar changes in Waitrose earlier this year, with customer and partner feedback increasing significantly since.
“It’s since been ranked the number one supermarket for customer satisfaction.”
LaToya Harding
Should you ever take career advice from TikTok influencers?
From quiet quitting to lazy girl jobs, it’s clear that social media is influencing the way we work — and there is always a new work phenomenon that gets people talking.
As well as starting new workplace trends, TikTok has become a common place for job-seekers to get advice on challenging topics like discrimination or taxes.
A recent survey by Resume Builder of 1,000 Gen Z TikTok users found that 70% encountered career advice weekly. A further 41% said they had made a career-related decision based on TikTok advice.
But not all advice is good advice. Researchers at the Swiss Financial Institute analysed finance tips from 29,000 social media accounts and found that more than half of the influencers were "anti-skilled" — meaning that following their advice would likely lead to losing money.
'It’s time for interest rates to fall,' says analyst
Federal Reserve Board Chairman Jerome Powell speaks during a news conference at the Federal Reserve Board Building Tuesday, Wednesday, July 31, 2024, in Washington. (AP Photo/Jose Luis Magana) (Jose Luis Magana, Associated Press)
Richard Flynn, managing director at Charles Schwab UK, said:
“Today’s figures show that the rate of inflation has fallen compared to last month. This drop reinforces the message that recent labour figures have made clear to the Federal Reserve: it’s time for interest rates to fall.
“While investors have begun to price in a rate cut at the September meeting, we have seen dramatic moves in the market this month – volatility that reflects residual uncertainty about the outlook for the market.
"Although today’s lower CPI reading is another convincing piece of evidence in favour of less restrictive monetary policy, we expect that the market will remain highly sensitive to economic data releases until a September slash is locked in.”
LaToya Harding
US inflation falls to 2.9%
Inflation across the US economy slowed to its lowest in over three years. The annual US CPI inflation rate rose by 2.9% in the year to July, down from 3% in June.
This was the smallest 12-month increase in prices since March 2021.
On a monthly basis, prices rose by 0.2%, following a 0.1% fall in June.
Most of this increase was due to a pick-up in shelter (i.e. housing) costs. Energy prices were unchanged in the month, while food price rose by 0.2%.
Core inflation (which strips out food and energy) rose by 3.2% in the year to July, the smallest 12-month increase since April 2021.
The US Inflation Rate (CPI) has moved down from a peak of 9.1% two years ago to 2.9% today.
What's driving that decline?
Lower rates of inflation in Used Cars, Gasoline, New Cars, Fuel Oil, Apparel, Food at Home, Gas Utilities, Medical Care, Food away from Home, Electricity,… pic.twitter.com/1l7ZpmTknd
In the three months to 30 June, TUI’s underlying earnings before interest and tax came in at to €232m (£199m), up 37% from €169m a year earlier. Net debt improved, declining from €3.1bn in Q2 2024 to €2.1bn.
Revenues increased by nearly 10% to €5.8bn, driven by a 5.5% increase in Q3 passenger numbers from 5.5 million to 5.8 million. For the summer of 2024, TUI has seen robust booking performance, with 88% of the programme sold compared to 60% previously.
The company also reiterated guidance for a 25% rise in operating profit this year and 10% increase in revenues.
TUI said bookings did not slow despite higher prices for its flights and packages, up 3% year-on-year.
The company's cruises segment also reported another good quarter with higher occupancy, higher rates, and average fares increasing by 7%.
TUI Group CEO Sebastian Ebel said:
“This also demonstrates the strength and future viability of our business model. We are growing profitably and are delivering what we have announced.”
The German group recently switched its listing from London to Frankfurt but maintains a large customer base in Britain and saw a boost from the insolvency of competitor FTI.
LaToya Harding
UK consumer confidence rebounds in July
Consumer confidence in the UK improved last month, as people grew more optimistic about their household finances.
Polling company YouGov’s index of consumer confidence jumped by almost two points this month, from 109.4 to 111.3.
Briton’s net confidence in their household finances for the year ahead rose into positive territory for the first time since August 2021.
Confidence among homeowners that house prices will rise in the next 12 months rose too
LaToya Harding
Gold prices edge up
Sipa US, Sipa US
Gold prices edged up in early Wednesday trading, nearing the all-time high reached in July.
Yesterday's US Producer Price Index numbers came in lower than expected, leading to a drop in treasury yields and a weaker dollar.
Ricardo Evangelista, senior analyst at ActivTrades, said:
"The effect on gold prices was subdued as traders opted to hold off until the release of July's US consumer inflation data today.”
“If the report confirms a slowdown in inflation, we could see a more pronounced response from gold traders.”
“Expectations of a 50 basis point rate cut by the Federal Reserve in September would likely rise, pushing down treasury yields and the dollar, thereby boosting the precious metal's price”.
“This momentum could even propel gold to a new historical high, with additional support coming from escalating geopolitical tensions in the Middle East, which are driving demand for haven assets.”
LaToya Harding
Where to invest your money when interest rates are falling
UK interest rates have fallen for the first time in four years in welcomed news for homeowners and small businesses. But what about investors?
The Bank of England's Monetary Policy Committee (MPC) voted 5-4 in favour of reducing the bank rate by 0.25 percentage points on 1 August. Four members preferred to maintain the rate at 5.25% and governor Andrew Bailey had the decisive vote.
The BoE said it intends to reduce rates only gradually from here. But with markets expecting Threadneedle Street to do so once more before the end of the year, investors may be wondering where to turn when it comes to their next investment choices amid lower rates.
Falling interest rates typically boost bond prices, as the cost of borrowing decreases. However, there is variety of potential picks across equities, funds, investment trusts, and bonds.
Companies across the eurozone hired staff at a slower pace during the second quarter of the year, according to the latest figures from Eurostat
Employment grew 0.2% in the three months to June, down from 0.3% over the previous quarter.
It comes amid declining confidence in Germany, Europe’s largest economy.
Money markets indicate that the European Central Bank (ECB) will cut interest rates two more times this year in response to the bloc’s weakening economy, with growth remaining at 0.3% in the second quarter.
LaToya Harding
Aviva boosted by higher insurance premiums
imageBROKER/Timon Schneider, imageBROKER.com GmbH & Co. KG
Sticking with corporate news...
Aviva posted higher sales and profits on the back of “excellent trading” over the past six months.
The London-listed firm said it was boosted by a jump in UK general insurance premiums, while sales from its retirement division dipped. It reported an operating profit of £875m for the first half of 2024, up 14% on the same period a year earlier, ahead of analyst expectations.
The insurance company added that general insurance premiums grew by 15% to £6bn across the whole group, with an 18% rise in the UK and Ireland.
Premiums in the UK and Ireland rose as higher pricing and new propositions helped drive a 30% increase for personal lines insurance, with commercial lines up 10%.
Amanda Blanc, group chief executive, said:
"Sales are up, operating profit is up, the dividend is up. Our plan to deliver more for customers and shareholders is working really well."
LaToya Harding
Flutter Entertainment shares surge
Flutter Entertainment (FLTR.L) jumped as much as 11% on Wednesday after opening, on track for its best day in eight months, as the world’s largest online betting company raised its full-year outlook after a much better-than-expected second quarter.
Shares are up around 8% at the time of writing.
The company now expects US revenue of between $6.05bn and $6.35bn and adjusted EBITDA of $680m to $800m.
This is up from previous guidance of $5.8bn to $6.2bn revenue and adjusted EBITDA of $635m to $785m.
Revenue outside the US is expected to be between $7.85bn and $8.15bn, while adjusted EBITDA is set to be $1.69bn to $1.85bn. This is up from previous guidance of $7.65bn to $8.05bn and $1.63bn to $1.83bn, respectively.
LaToya Harding
Eurozone economic growth remains steady
Eurozone GDP rose by 0.3% in the three months to June, statistics body Eurostat said n Wednesday.
This confirmed the ‘flash’ estimate released at the end of July and follows 0.3% growth in January-March quarter, after stagnation in the second half of last year.
France grew by 0.3%, while Germany’s GDP fell by 0.1% – putting the eurozone’s largest member on the brink of recession.
Along with the house price data, the ONS released UK rental prices.
Average price rents jumped by 8.6% in the year to July, which also matched June’s data.
Average rents increased to £1,319 (8.6%) in England, £748 (7.9%) in Wales, and £965 (8.2%) in Scotland, in the 12 months to July 2024, the ONS reports.
In England, rents inflation was highest in London (9.7%) and lowest in the North East (6.1%), in the 12 months to July 2024.
Sarah Coles, head of personal finance for Hargreaves Lansdown, said rent rises remain “eye-watering”, despite the pace of increases slowing.
“Landlords continue to sell up in the face of higher mortgage costs, tougher tax rules and the likelihood of more stringent legislation,” she said.
“Meanwhile, growing tenant numbers make it harder to get hold of a property, even if you’re prepared to pay sky-high prices. It’s difficult to see how things will ever get any better.”
LaToya Harding
Pound falls after inflation data
The pound fell on Wednesday after a softer-than-expected UK inflation reading, which supported expectations of further interest rate cuts from the Bank of England (BoE) this year.
Sterling fell as much as 0.3% before recovering slightly to $1.2827, heading for its first session of decline in five against the dollar.
It also softened against the euro, with euro/sterling trading up 0.3% at 85.69 pence. Both had been roughly flat before the data.
It comes as the pound touched a two-week high on Tuesday after figures showed the UK jobless rate dropped to 4.2% in June - defying expectations for a small rise.
LaToya Harding
82% of manufacturers have adopted AI
In today’s digital landscape, AI stands out as one of the most transformative and influential technologies. The manufacturing industry is harnessing the power of AI-driven insights, with new research revealing that 82% of businesses have already implemented AI.
Augury, an AI-driven platform that analyses machine sounds to cut waste and boost sustainability, has released research, looking at the current landscape for manufacturers in the UK.
The report revealed the following:
82% of businesses already have AI technology implemented within their businesses, leaving those that don’t, behind the competition.
70% of firms will invest more in AI than they did in 2023.
Nearly all firms (98%) say that their business is advanced at adopting AI use cases for solving specific production problems.
LaToya Harding
How to manage the cost of university
Chris Radburn, PA Images
As nervous A-Level students open their results this week, parents could be forgiven for feeling a bit anxious too – especially when they consider the cost of further education. The sums involved can be hair-raising.
Three-years of study for an English student will cost an estimated £67,000, and while some of it can be borrowed through the government loans schemes, parents could be in the frame for a lot of it. They’d be forgiven for wondering whether it’s worth the cost.
A big chunk of it will fall to the student, through government tuition fees loans and maintenance loans, repaid on graduation. Unfortunately, there’s an increasing chance they’ll have to repay these in full — plus interest — after the rules changed last year. Most people who started university before the change won’t have to repay everything borrowed through government schemes. If they started since last September, most people will.
The maths around student loans changed last year, when the threshold income for making repayments was cut for new students to £25,000 and the length of time before the outstanding debt is written off was lengthened from 30 years to 40 years.
ONS data published this morning showed that average UK house prices increased by 2.7% to £288,000 in the 12 months to June, the fourth consecutive month with an annual rise.
Average house prices increased in England to £305,000 (2.4%), in Wales to £216,000 (1.8%), and in Scotland to £192,000 (4.3%).
Nick Leeming, chairman of Jackson-Stops, said:
“Olympic fever spread to the housing market last month with today’s figures showing a further boost to house prices in July. With much of July underpinned by Labour’s landslide election victory, the market is riding on the coattails of a new political dawn.
“Nearly six weeks on from the election, with inflation holding steady and the base rate having been cut for the first time since 2020 - the hope is that this will lead to a softening in mortgage prices and will provide a rosier picture for the market’s trajectory.
"There is a new sense of confidence in the market and as a result buyer demand is slowly ticking up – last month we saw viewings increase by 15% across the Jackson-Stops network."
Average UK house prices increased by 2.7%, to £288,000 in the year to June, unchanged from the revised estimate for the 12 months to May.
