UK inflation unexpectedly ticked up to its highest level since January 2024, in a move that adds further complexity to the Bank of England’s calculations for rate cuts and underlines the problems facing the Chancellor, Rachel Reeves. June CPI inflation rose to an 18-month high of 3.6% and the key services CPI gauage ticked up to 4.7%. Andrew Bailey has indicated that he’s more worried about the labour market and a cut in August seems like the most likely course of action still. After yesterday’s sharp decline for sterling the firmer inflation numbers helped cable rally to hold the 1.34 handle.

The FTSE 100 is holding its ground this morning to trade flat to slightly higher, although it’s well off yesterday’s record high above 9,000 as the market wobbled after summitting and Wall Street fell. European stock markets continue to pull lower, with chip company ASML down 6% at the open. The Dutch firm opened lower after backtracking on 2026 growth commitments citing macro uncertainties. Renault dropped -16% as the carmaker cut margin guidance. Meanwhile, DNO ASA, Genel Energy, and Gulf Keystone are all down heavily this morning after a set of explosions near oil fields in Iraq. Rio Tinto shares rose on a 13% rise in copper production in Q2, with the company saying FY copper output seen at the higher end of guidance.

US inflation also rose in June, with the headline CPI level rising to 2.7% from 2.4%, marginally ahead of some expectations although we’d called 2.7%. Core inflation, which strips out volatile elements such as food and energy, rose to 2.9%. The data suggests inflation from tariffs may be starting to bite. The 10yr Treasury yield moved to 4.5% before coming off a touch. The US 30yr yield move above 5% - a potential red flag for markets, as discussed yesterday, but we await to see whether there is a move on this or if it retreats as it did last month.

The Dow Jones fell almost 1% and the S&P 500 was down 0.4% despite some heavy lifting by Nvidia, which climbed another 4% to a fresh record high at $170 on news it would resume shipping H20 GPUs to China. The mood lifted the wider chip sector but the inflation data weighed on consumer defensives, financials and healthcare fell too with troubled UnitedHealth making fresh lows.

Earnings look ok so far from Wall Street. JPMorgan Chase beat expectations for the second quarter, although earnings were down 17% and revenues fell 10%. Shares ended the day lower despite beating forecasts. You never get credit for volatile markets spiking trading revenues. Bank of America, Goldman Sachs, Morgan Stanley and Johnson & Johnson are all due to report today. Check our Q2 US earnings preview.

“The U.S. economy remained resilient in the quarter,” CEO Jamie Dimon said. “The finalization of tax reform and potential deregulation are positive for the economic outlook. However, significant risks persist – including from tariffs and trade uncertainty, worsening geopolitical conditions, high fiscal deficits and elevated asset prices.”

Meanwhile, Trump said he has the votes now to pass some important legislation around cryptocurrencies. He also said drug tariffs are likely by August 1st.