The FTSE 100 opened back above 9,300 and could reach a new high-water mark today. That’s despite UK GDP growth coming in a little slower than expected in the second quarter.
The economy expanded 0.2% in the three months to June, while forecasts had expected growth of 0.3% in line with the previous period. On a rolling basis, quarterly growth has slowed in each of the last three months, with monthly growth stalling completely in July. This provides further challenge to Chancellor Rachel Reeves to plug the UK’s funding gap without stalling the economy in the forthcoming Budget.
There was a marked difference between services and the production of physical goods. Production output fell by 1.4% mainly driven by a fall in manufacturing activity. Services grew by 0.4% with scientific research and development leading the way at 3.4% underlying the importance of supporting UK innovation.
Wall Street closed at yet another record high. Accelerating US inflation, and initial jobless claims jumping to a near four-year high hardly sound like reasons to be cheerful. But core CPI, the preferred measure of the Federal Reserve Bank, was steady at 3.1% and bang in line with expectations. Taken together with the growing signs of deterioration in the jobs market, investors are choosing to focus on the outlook for US base rates where markets are now pricing in a fall of 0.7 percentage points by the end of 2025, with at least a quarter point cut expected next week.
Brent Crude oil prices have steadied at just under $66 per barrel after falling around 2% yesterday. News of a surprise inventory build of 3.9 million barrels in the US last week is compounding mounting concerns around oversupply as OPEC+ members and other nations plan to boost production. The International Energy Association expects global oil supply to rise by 2.7 million barrels per day (bpd), more than four times the projected increase in demand, with another 2.1 million bpd supply addition expected next year.
By Derren Nathan, head of equity research, Hargreaves Lansdown.
