On Wednesday, British shares made a notable recovery, with the FTSE 100 index closing up 1.13%. This upward trend is attributed to the anticipation surrounding the impending monetary policy decisions from the US Federal Reserve. Analysts and investors alike are bracing for the Federal Open Market Committee's meeting where it is widely expected that interest rates will remain unchanged.
This pause in rate adjustments aligns with market expectations of potential easing in monetary policy as the economy transitions into September. Domestically, attention now turns to the Bank of England, which is scheduled to announce its monetary policy decision on Thursday. The outlook suggests that the BoE's Monetary Policy Committee is likely to lower key interest rates by 25 basis points, bringing it down to 5%.
Such a move could significantly impact borrowing costs and consumer spending in the UK, adding further dimensions to the markets. Across the European landscape, economic data has provided interesting insights. Notably, consumer prices in the eurozone have surged faster than analysts had anticipated in July.
According to Eurostat's preliminary estimates, the annual inflation rate for the eurozone stands at 2.6%, showing an increase from the previous month's rate of 2.5% and surpassing the consensus prediction of 2.4%. Core inflation, however, remains steady at 2.9%, which is slightly above analysts' consensus of 2.8%.
TS Lombard commented on the recent inflation data, indicating that while the July flash HICP (Harmonized Index of Consumer Prices) leaves the European Central Bank (ECB) with little reason to initiate rate cuts in September, there are encouraging signs of disinflation within the service sector. Their note emphasized, "Today's data leave realized inflation slightly above ECB projections, putting even more weight on the next couple of inflation prints and quarterly wage/productivity data ahead of September.
However, the ECB is afforded some time to assess all available information, including improvements in service HICP and less promising indicators from service new hiring expectations." Turning to the corporate realm, the biopharmaceutical giant GSK has seen its shares dip by 1.98% at closing, despite reporting year-over-year growth in turnover for the six months ending June 30.
Notably, GSK has also enhanced its guidance for full-year 2024 turnover growth to between 7% and 9%, a marked increase from its previous forecast range of 5% to 7%. As market dynamics shift, GSK's performance continues to draw interest, reflecting the complexities of the current economic environment..