Daily Market Update: Wall Street posts fresh record high
Wall Street’s S&P 500 reached a fresh record high yesterday.
However, risk appetite has been dented in early trading with European equities and the oil price on the slide. This morning the Euro Stoxx is down over 1% in early trading. Yesterday saw a notable sell-off in Turkish equities with Istanbul’s Bist 100 index down 7% following the weekend’s botched coup attempt. On the currency markets EUR/USD is unchanged relative to yesterday’s open at $1.106. Sterling has slipped a bit against both the greenback and the single currency. EUR/GBP is up from 83.6p to 83.9p over the last 24 hours. Meanwhile GBP/USD has dipped back below $1.32.
Yesterday the UK’s new Foreign Secretary, Boris Johnson, said he had held "positive and productive" one-on-one talks with many of his European Union counterparts about implementing Britain's vote to leave the bloc. Meanwhile Boris’s boss, Theresa May, will travel to Berlin tomorrow for talks with German Chancellor Angela Merkel, as she uses her first overseas trip as prime minister to launch a post-Brexit foreign policy in Europe. Mrs May will also meet Francois Hollande, French President, in Paris on Thursday. Yesterday Ireland’s Taoiseach, Enda Kenny, urged fellow European Union leaders not to impose harsh terms on Britain as punishment its vote to leave the bloc, warning such an approach could inflame anti-EU sentiment across the continent.
For today the focus in the UK are the latest consumer price and house price inflation figures. The EU referendum result and ensuing market disruption are unlikely to have any material impact on the UK inflation data for June. Underlying trends in wage inflation and firms’ pricing behaviour suggest an ongoing subdued inflation environment and short-term survey data also point to broadly stagnant inflation in June. The annual rates of headline CPI and core CPI (excluding food and energy) are expected to rise by 0.1 pp to 0.4% and 1.3% respectively. The combination of rising oil prices coupled with the recent marked depreciation in sterling will see the annual rate of UK CPI accelerate quite quickly to around 2% - the MPC’s target rate - by Q1 2017.
Outside the UK we get the influential German ZEW survey. Today’s release of the July survey represents the first poll of Germany’s financial analysts since the UK’s EU referendum result. Both the current situation and forward looking expectations components are expected have fallen. In the US there is an absence of top tier data releases with this afternoon’s housing starts and building permits for June attracting minimal interest.