- The UK stock-market was lower last week. Investors were weighing higher-than-expected UK and US inflation data.
- Data from the Office for National Statistics (ONS) showed that UK inflation in June rose more than expected and reached a three year high. The consumer price index rose to 2.5%, from 2.1% in May. That’s the second month it has been above the BoE’s 2% target and puts pressure on the central bank to raise interest rates. A second Bank of England official, Michael Saunders, of the the monetary policy committee, has said inflation could hit four per cent this year and the central bank may need to take action.
- Concerns over the rising number of coronavirus delta variant cases are still to the fore as well with a number of Asian countries, including Japan, imposing new tighter restrictions. In Europe, Christine Lagarde, ECB President, has indicated that the central bank will introduce new measures next year to support the economy when the current program ends.
- Oil was down last week, and again today. Energy stocks are being marked down again after news that OPEC+ reached an agreement on the weekend to boost oil supply starting in August.
- Our Breadth indicator turned neutral and our Momentum Indicator ticked lower again.
- The US stock-market was lower.
- Data released Tuesday showed inflation increased to 5.4% in June, its largest monthly gain since August 2008. Investors are worried the Federal Reserve might need to cut back its current stimulus program. Fed Chair Jerome Powell made calming comments that it was still too early to reduce support for the US economy. At the same time Powell acknowledged that inflation was rising at a faster pace than anticipated but maintained the spike is “transitory”.
- On Thursday, Treasury Secretary Janet Yellen seemed to take the same stance as the Fed saying she expects inflation to rise over coming months but then cool off.
- Defensive sectors were the best performers last week. Income stocks, real estate and utilities all did relatively well as US 10-year Treasury yields fell again.
- Our Breadth Indicator stayed negative and our Momentum Indicator ticked lower.
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