Weekly round up
UK markets rose this week tracking positive sentiment on the global financial markets, with the FTSE 100 Index rising by 1.1% to trade at 7,290 points at the time of writing.
The rate of UK inflation rose to a fresh 40-year high of 9.4% in June as sharp rises in food and petrol prices drove inflation towards double digits for the first time since 1982.
This figure will intensify pressure on the Bank of England to raise interest rates, opening the door for a 0.5% hike in August, which would be the largest since 1995. Meanwhile, Conservative Party members voted for Foreign Secretary Liz Truss to take on former Chancellor Rishi Sunak in the battle to become the UK’s next Prime Minister.
Consumer confidence in the UK remained at a record low in July and retail sales declined for a second straight month, as consumers struggled with rising prices and higher interest rates, although the decline was smaller than expected. Most components of the indicator were unchanged, but Britons’ assessment for personal financial situation for the next 12 months ticked higher, in what could reflect optimism over an imminent change in government.
The European Central Bank has raised interest rates by half a percentage point, its first increase for more than a decade, while pledging to prevent rising borrowing costs from sparking a Eurozone debt crisis. The increase ends eight years of negative rates to release inflationary pressures in the Eurozone. Inflation in Europe continues to increase and break record rates, showing no signs of peaking and approaching double-digits. The European Central bank also said that further normalisation of interest rates will be appropriate in the upcoming meetings.
In the commodity markets, Brent crude futures traded around $103 per barrel on Friday after falling for two straight sessions, as investors navigated a volatile week marked by persistent supply-side issues, weakening US gasoline demand and mounting risk of a global economic slowdown.
US president Joe Biden failed to secure a pledge from Arab leaders this week to pump more oil despite remarks from a top US energy envoy indicating confidence that the major producers have spare capacity and are likely to boost supplies.
Gold traded around $1,720 an ounce on Friday, as a rebound in the Dollar and looming interest rate hikes by major central banks dampened bullion’s appeal. Markets will be anticipating the US Federal Reserve’s forward guidance on interest rates, as any hawkish statement could push the US dollar higher and hurt gold prices.
US equity futures fell on Friday as investors digested more corporate earnings reports, with disappointing results from Snap hurting sentiment and sending social media shares down. Snap fell approximately 28% in pre-market trading after the social media firm missed the top and bottom lines in the second quarter and said it would substantially slow hiring. Other technology firms heavily reliant on advertising sales followed suit, with losses from Alphabet, Meta Platforms, Twitter, and Pinterest. The news is set to break a strong week of rises on Wall Street, with the three major US averages posting their third straight positive session on Thursday. Nevertheless, the tech-heavy Nasdaq is on track to gain more than 5% this week, while the Dow Jones Industrial Average and the S&P 500 Index are up 2.4% and 3.5% respectively.
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.