The Market Close - U.K. Inflation decline dampens enthusiasm for interest rate rise - Collins Sarri Statham Investments

Today's Closing Update

U.S. shares opened lower, weighed down by earnings reports from some big names and concerns over President Donald Trump’s ability to push through his pro-growth policies.

European and U.K. shares were swept lower Tuesday, under pressure as the euro stepped up to a 14-month high against the U.S. dollar and as disappointing corporate earnings reports rolled in.

The UK’s inflation rate dropped unexpectedly to 2.6% in June, down from 2.9% in May, official figures have shown. It is the first fall in the rate since October 2016 and was largely down to lower petrol and diesel prices. Fuel prices fell for the fourth month in a row in June, according to the Office for National Statistics. Economists say the fall in inflation could ease pressure on the Bank of England to raise interest rates. The UK inflation rate has risen sharply since the referendum on membership of the European Union last June, partly due to an increase in the cost of imported goods following the fall in the value of the pound.

British Chancellor of the Exchequer Philip Hammond insisted that he is committed, like other cabinet ministers, to leaving the EU single market and customs union after Brexit, amid rumours of growing rifts in the ruling Conservative party. Hammond was pressed in parliament by a Conservative lawmaker to say whether he was “absolutely, personally and enthusiastically committed” to Prime Minister Theresa May’s Brexit plan. “Yes, I’ve made it clear on many occasions that when we leave the EU on March 29, 2019, we will also leave the single market and the customs union,” he said, following a cabinet meeting with May and other ministers earlier Tuesday. “Those are matters of legal necessity,” Hammond said. Officials quoted by the BBC and other media said May had called for “strength and unity” from her cabinet, stressing the need for confidentiality after apparent leaks in recent days.

Rupert Murdoch’s 21st Century Fox has said it is confident the Culture Secretary will make her decision on whether to refer its bid for Sky to the competition watchdog in the “coming days”. Fox said Karen Bradley should dismiss “flagrant political attempts to interfere” after a Government spokesman last week reportedly said she would not make a decision until after the parliamentary summer recess. This would mean Fox would have to wait until at least next March to find out if its £11.70bn swoop for Sky can go through, if Bradley chooses to refer the deal to the Competition and Markets Authority. But in a letter from its lawyers Allen & Overy, Fox hit out at “political pressure” and took a swipe at former Labour leader Ed Miliband after he recently urged Ms Bradley “not to do a grubby deal with the Murdochs”. Bradley said at the end of June she was “minded” to refer the deal to the CMA over concerns about diversity in the UK’s media sector. Miliband has since joined forces with other higher profile senior MPs including Vince Cable, the Liberal Democrat leadership candidate, in a letter to the Government claiming Ofcom made “fundamental failures” in its investigation and calling for a full CMA inquiry into the deal.

Bank of America posted stronger-than-expected quarterly figures, boosted by its consumer and global banking units. Total revenues grew 7% to $22.8bn, with net interest income ahead by 9% to $11.0bn, with the latter benefiting from higher interest rates and loan growth, the company said in a statement. In parallel, net income increased 10% to $5.3bn, for earnings per share of 46 cents in comparison to 41 cents one year ago. Analysts had projected EPS of 43 cents on $21.78bn of sales.
BofA chief Brian Moynihan highlighted the improvement seen in the lender’s efficiency ratio, which reached 60%, and its plans to return $17.0bn in capital over the next four quarters.

Bond trading revenues at Goldman Sachs slid 40% in the second quarter, echoing similar declines at other US banks. Revenue from trading fixed income, commodities and currencies was $1.16bn as the US increased interest rates and cut back on bond buying. Total net revenues for the first half rose 12% to $15.91bn. Separately, rival Bank of America saw a boost to its profits from tighter interest rate policy. Goldman posted profits of $1.83bn for the quarter, down from the $2.2bn reported in the first three months of 2017 and only slightly higher than the $1.82bn it reported for the same quarter last year.

Netflix shares surged on after the video streaming firm said it had about 104 million subscribers. The US company said the better-than-expected number was a sign that investment in new shows and movies was paying off. Netflix has produced shows such as 13 Reasons Why, about teen suicide, political drama House of Cards and The Crown. Boss Reed Hastings said it was “the rewards of doing great content”. Netflix shares rose more than 10% in after-hours trading in New York after announcing its second-quarter results. The firm said it added about 5.2 million members during the quarter, mostly from overseas. International members now account for about half of its subscriber total.

Growth in UK house prices has continued to slow, but the cost of the average home still increased by 4.7% in the year to May 2017. Figures from the Office for National Statistics (ONS) show a drop from the 5.3% rise in the year to April. The average UK house price stood at £221,000 in May, up £10,000 from the same month last year. The main contribution to the rise in house prices came from England, where prices jumped by 5%. The average price of a house in England is now £238,000, the ONS said, while a property in Wales costs £150,000 after a 3.8% increase in prices over the past 12 months. House prices in Scotland rose 3.5% to £143,000, while the average price of a Northern Ireland home stands at £124,000 after a 4.3% rise for the year to May.

Oil prices rose as demand soaked up some of the surplus supplies from OPEC and the United States, but traders said the market remained in a tight range and showed few signs of big short-term moves.

Gold climbed, with a sharply weaker U.S. dollar sending prices for the yellow metal up for a third session in a row to their highest level of the month so far.

Market Close

Market	Index	Change	% Change
UK 100	7390.2	-13.9	-0.2%
UK 250	19,613.4	+92.8	+0.5%
GER 30	12,433.9	-153.3	-1.2%
FRA 40	5,179.4	-50.8	-1.0%
U.S. 30	21,540.95	-88.77	-0.4%
U.S. 500	2,456.9	-2.3	-0.1%
OIL (BRENT)	48.86	+0.44	+0.9%
GOLD	1,241.79	+7.68	+0.6%

UK Risers & Fallers

Company	Price	Change	% Change
IG Group	645.75	+91	+16.4%
G4S	341.1	+11.3	+3.4%
British Land	623	+19	+3.1%
Melrose Industries	233.05	-7.5	-3.1%
Experian	1532	-32	-2%
Barclays	205.05	-4	-1.9%

Reported Economic Data

Time/Date	Previous	Forecast	Outcome
9:30am: U.K. CPI y/y	2.9%	2.9%	2.6%
9:30am: U.K. RPI y/y	3.7%	3.6%	3.5%
9:30am: U.K. PPI Input m/m	-1.3%	-0.8%	-0.4%
2:30pm: U.K. BOE Gov Carney Speaks	–	–	–