UK financial markets
UK inflation fell to 7.9% in June, down from 8.7% in May. This is the first-time inflation has fallen since March, and it is good news for people who are struggling with the rising cost of living.
The fall in inflation was driven by several factors, including the recent decline in energy prices. The news eases some of the pressure faced by the Bank of England to keep raising interest rates.
UK Consumer Price Inflation however remains the high and likely to remain above the Bank of England’s target of 2 per cent for some time.
The news of falling inflation helped to boost UK stocks this week. The FTSE 100 and FTSE 250 both rose by more than 1%.
UK house builders were the biggest winners, as investors were optimistic that the Bank of England will slow its rate hike cycle. This would mean that mortgage rates would not continue to rise as sharply, which would be better for
house builders’ future sales.
US equity markets
US banks have been reporting their quarterly earnings this week. The results have been mixed, but the more diversified banks have generally performed well.
Banks with a lending division have benefited from higher interest rates. This is because they can charge more for loans, which has boosted their profits. However, corporate, and institutional depositors are demanding higher rates on their deposits. This could put pressure on bank profit margins in the future.
Artificial Intelligence (AI) continues to grab some headlines with the Biden administration looking to craft guardrails for AI technologies. This week, executives from Google and OpenAI met in Washington to discuss how to ensure that AI is developed safely and transparently.
Commodity markets
Commodities prices have been on the rise recently. Gold is up nearly 2.5% since early last week, and oil is trading above $80 again. The rise in gold reflects the increased uncertainty in the global economy. Investors are buying gold as a haven. The oil price has been strong on continued Chinese demand as their country recovers from the COVID lockdown restrictions.
The information provided in this communication is not advice or a personal recommendation, and you should not make any investment decisions on the basis of it. If you are unsure of whether an investment is right for you, please seek advice. If you choose to invest, your capital may be at risk and the value of an investment may fall as well as rise in value, so you could get back less than you originally invested.