Must read: inflation fears, ASML, Richemont

GLOBAL MARKETS

After the FTSE 100 temporarily surpassed 9,000 yesterday, the UK index is trading either side of last night's close. Miners like Rio Tinto Ordinary Shares (LSE:RIO) and Antofagasta (LSE:ANTO) are outperforming at the top of the basket following production updates.

UK Inflation data is front and centre with a much hotter than anticipated reading, lifting the pound and putting pressure on both the chancellor and the central bank. Last night at her Mansion House address, Chancellor Rachel Reeves announced plans to reduce regulation and strengthen the financial services sector. However, she held off from announcing changes to ISAs or increasing the bank levy. 

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In Europe, ASML Holding NV (EURONEXT:ASML) shares have fallen sharply after the chipmaker warned that it cannot confirm that it will deliver growth next year, citing macroeconomic and geopolitical concerns. 

US futures are pointing lower after the Nasdaq hit a record close fuelled by NVIDIA Corp (NASDAQ:NVDA). US inflation also came in above forecast, hitting 2.7% for June as Trump’s tariffs starts to filter down to the real economy. Nonetheless, traders are still pricing in around a 57% chance of a quarter-point Federal Reserve rate cut in September. Meanwhile, it was a mixed picture for US earnings as results from Wall Street continue later today.

UK INFLATION 

The UK consumer price index (CPI) rose by 3.6% in the 12 months to June, up from 3.4% in the previous month, ahead of analysts’ expectations to reach the highest level since January 2024. Core CPI, which strips out the more volatile elements (energy, food, alcohol and tobacco), hit 3.7% year-on-year ahead of forecasts for 3.5%. 

This was driven by food price inflation which has been rising for three straight months, and transport which increased sharply between May and June. UK inflation remains ahead of France and Germany with goods price inflation now at the highest rate since October 2023. 

June’s surprisingly hot inflation print is not what the Bank of England nor the government would like to see. Higher inflation, especially on essential items like food and transport, increases cost-of living pressures for households, weighing on the UK economy.

Today’s data makes it more difficult for the Bank of England to justify a near-term rate cut which would support households and businesses by making borrowing cheaper. However, slack in the labour market and the latest disappointing GDP print both suggest the central bank is still likely to cut rates in August. All eyes are on tomorrow’s labour market data – any weakness seen there will bolster the case for a rate cut.

RICHEMONT 

Compagnie Financiere Richemont SA Class A (SIX:CFR) reported quarterly revenues of 5.4 billion euros, up 6% at constant exchange rates. Jewellery was a bright spot with an 11% jump in sales, the third straight quarter of double-digit growth, thanks to strong demand at key brands like Cartier, Van Cleef & Arpels and Buccellati. This helped offset weakness in watches where sales fell. 

Richemont enjoyed strong growth in Europe and Americas but weakness in China, Hong Kong and Japan which was hurt by a stronger yen, reducing tourist demand there.  

Shares in Richemont have performed well this year, with the stock extending gains this morning thanks to its largely upbeat quarterly sales report, with particular strength in jewellery.