FTSE Closes Higher and Wall Street Maintains Gains Amid Inflation Pressures

Wall Street Maintains Gains Amid Anticipation of Key US Inflation Data; FTSE 100 Reverses Earlier Gains in Afternoon London Trade

Key Points:

• Dow Jones rose 0.43% to 34,089.23 points
• S&P 500 gained 0.31% to 4,409.53 points
• NASDAQ climbed 0.28% to 13,723.38
• FTSE 100 rose 0.12% to close at 7,282 points
• CAC 40 in Paris rose 1.10% to 7,222 points
• DAX climbed 0.73% to 15,782 points

Wall Street and FTSE 100 experienced mixed performance on Tuesday, influenced by various factors impacting the global markets. While investors eagerly awaited crucial US inflation data, the latest wage growth figures in the UK posed challenges for the Bank of England's efforts to curb inflation. Despite these developments, Wall Street managed to maintain gains, and the FTSE 100 closed higher after a slight reversal.

Wall Street Performance:

The Dow Jones index exhibited a positive trend, rising by 0.43% to reach 34,089.23 points. Likewise, the S&P 500 showed an upward movement, gaining 0.31% to settle at 4,409.53 points. The tech-heavy NASDAQ also contributed to the market's optimism, climbing 0.28% to 13,723.38.

FTSE 100 and European Markets:

In contrast to Wall Street, the FTSE 100 experienced a minor setback during the afternoon London trade. After initially showing gains, the index closed at 7,282 points, marking a 0.12% increase. European markets displayed positive momentum, with the CAC 40 in Paris rising by 1.10% to 7,222 points and the DAX in Germany climbing 0.73% to 15,782 points.

UK Wage Growth Figures and Inflation Concerns:

The Office for National Statistics (ONS) released data indicating that average weekly earnings in the UK, excluding bonuses, reached a record-high annual growth rate of 7.3% during the three months leading up to May. This figure surpassed analysts' expectations, posing a challenge to the Bank of England's goal of reducing inflation.

Upcoming Earnings Reports and Asian Markets:

Investors also looked forward to second-quarter earnings reports from major US banks, including JPMorgan, Wells Fargo, Citigroup, and BlackRock. In Asia, markets witnessed a recovery as China reported a significant decrease in factory-gate prices for June, the largest decline in seven-and-a-half years. Furthermore, consumer inflation in China reached its lowest point since 2021.

• Tokyo's Nikkei 225 closed with a marginal increase of 0.04% at 32,203.57 points.
• The Hang Seng in Hong Kong gained 1.18% to settle at 18,698.19.
• The Shanghai Composite in mainland China rose by 0.48% to 3,219.28 points.

Impact on Currency Markets:

UK wage growth data influenced currency markets, strengthening the pound against the US dollar. The exchange rate for the pound to the dollar (GBPUSD=X) rose by 0.28%, reaching 1.28, its strongest position since April 2022. Additionally, the pound appreciated against the euro, with the pound-to euro exchange rate (GBPEUR=X) increasing by 0.10% to 1.16.

Matthew Ryan, the head of market strategy at global financial services firm Ebury, shared his insights on the situation, stating, "Financial markets are now pricing in a peak in UK rates of around 6.35% in the first quarter of 2024, which would surely make the Bank of England the most hawkish major central bank in the world between now and then. We believe that markets may be slightly ahead of themselves. However, we do anticipate another 50 basis point hike from the Monetary Policy Committee (MPC) in August, with a real possibility that the base rate will peak above 6%."

Oil Prices and OPEC+ Output Cuts:

Oil prices continued their upward trajectory, bolstered by OPEC+ output cuts, which counteracted concerns over demand among investors. US crude oil, also known as West Texas Intermediate (CL=F), gained 0.47%, trading at $73.33 per barrel. Similarly, Brent crude (BZ=F) rose by 0.36%, reaching $77.97 per barrel.

In the meantime, Wall Street remained positive, sustained by optimism surrounding upcoming US inflation data. However, the FTSE 100 encountered a minor setback due to the UK's wage growth figures. Meanwhile, Asian markets rebounded as China experienced a decline in factory-gate prices. Currency markets reacted to the UK's wage growth data, strengthening the pound against the US dollar and the euro. Oil prices continued to rise, supported by OPEC+ output cuts. These developments underscore the complex and interconnected nature of global financial markets.