Equity and Bond markets benefit as US inflation drops to its lowest in 2 years

This week brought a significant shift in the narrative surrounding inflation. US headline inflation dropped to 3% in June. Core inflation has been more resilient than the headline rate but it also fell. Despite the Federal Reserve expected to keep hiking in the very short term, the speed of the decline was enough to buoy financial markets around the world as investors look forward to the end of US interest rate hikes and a weaker dollar. Government bonds rallied strongly, and equity markets also looked to the positive.

A soft landing remains a realistic outcome in the US and economically-sensitive equities saw some of the biggest gains. But the reaction in the UK appears optimistic in the face of otherwise gloomy updates. The Bank of England now expects average mortgage payments to go up by £3,000 a year, and potential buyers are being put off by high borrowing costs. Company insolvencies are expected to keep rising and unemployment is also up, despite more than 1 million vacancies still open. In the face of these headwinds, the BoE can only to look to the US with envy. 

For the following stories, please click on this link*

  • US: Markets welcome news of rapidly cooling inflation
  • UK: GDP contracts in May as rising rates take effect
  • Markets: Defence sector benefits as security gains importance

(*Please note, The contents of this e-shot been prepared for general information only. It does not contain all of the information which an investor may require in order to make an investment decision. If you are unsure whether this is a suitable investment you should speak to your financial adviser. This information is not guaranteed to be correct, complete, or accurate. FE Research is a division of Financial Express Investments Ltd, registration number 03110696, which is authorised and regulated by the Financial Conduct Authority (FRN 209967). For our full disclaimer please visit www.financialexpress.net/uk/disclaimer. Data Sourced from FE Analytics, and Bloomberg Finance LP.)

 

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