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London Quick Take - 22 July - UK inflation softens, oil rises and chips rally ahead of Alphabet, Tesla earnings
Neil Wilson
Investor Content Strategist
Note: This is marketing material. This article is not investment advice, capital is at risk.
UK inflation cooled more than expected in June, falling to an annual rate of 2.6% thanks to a drop in petrol prices. Core inflation remained unchanged at 2.6% while the stickier problem of services inflation eased to 3.6% from 3.7% in May. The puts the hawks at the Bank of England on the back foot, albeit core inflation remained stubborn and services sector inflation is still well above the 2 handle. Moreover, the worry is the recent re-escalation in the Middle East and corresponding rise in oil prices sends inflation higher again later in the year and it starts to look more entrenched...but yesterday's labour market figures shows the risks of inflation-wage-price-spiral are low down the pecking order of concerns right now. Sterling traded sharply lower yesterday vs the dollar to break through on the downside of the 200-day line but GBPUSD is firming up around the 50-day moving average around the 1.336/7 area. The 200-da y SMA at 1.340 (1.3398) now looks to be a clear resistance focus.
On oil, Brent crude prices jumped about 3% to clear $93 a barrel, the highest it's been in six weeks, after the US carried out another round of strikes on Iran, hitting targets for an 11th straight night. Adding further upwards pressure US President Donald Trump minimised the prospect of immediate talks with Iran and vowed to respond if Houthi rebels disrupt shipping in the Red Sea. Despite these concerns European stock markets opened tentatively higher on Wednesday, adding to solid gains on Tuesday that followed two straight sessions of losses. Meanwhile gold extended gains for a second day to hit a near-2-week high despite firmer yields with haven demand picking up and spot enjoying a bit of a technical lift from its $4k round number support after bears failed to push it hard below this level.
Whilst that's undeniably affecting risk sentiment, a strong rally for chip stocks is providing an offset as semis rebound from a run of steep losses. The Phill Fed semiconductor index (SOX) rallied more than +5% yesterday with Micron +12% higher and AMD and Intel +8%. Memory names like SanDisk +14%, Western Digital +12% and Seagate +11%. The rally for chips lifted the main Wall Street indices with the Dow Jones, S&P 500 and Nasdaq all snapping three-day losing streaks.
The busiest day for earnings sees Tesla and Alphabet kick off the Magnificent 7 reporting season. Read my Tesla earnings preview here. For Alphabet, it's going to be a familiar story of AI capex vs ad and cloud earnings growth. This is a key test for the market as the first hyperscaler to report earnings in the wake of the selloff in semis: is the AI capex supercycle still in play? AT&T, GE Vernova and ServiceNow are also slated to report earnings.
On oil, Brent crude prices jumped about 3% to clear $93 a barrel, the highest it's been in six weeks, after the US carried out another round of strikes on Iran, hitting targets for an 11th straight night. Adding further upwards pressure US President Donald Trump minimised the prospect of immediate talks with Iran and vowed to respond if Houthi rebels disrupt shipping in the Red Sea. Despite these concerns European stock markets opened tentatively higher on Wednesday, adding to solid gains on Tuesday that followed two straight sessions of losses. Meanwhile gold extended gains for a second day to hit a near-2-week high despite firmer yields with haven demand picking up and spot enjoying a bit of a technical lift from its $4k round number support after bears failed to push it hard below this level.
Whilst that's undeniably affecting risk sentiment, a strong rally for chip stocks is providing an offset as semis rebound from a run of steep losses. The Phill Fed semiconductor index (SOX) rallied more than +5% yesterday with Micron +12% higher and AMD and Intel +8%. Memory names like SanDisk +14%, Western Digital +12% and Seagate +11%. The rally for chips lifted the main Wall Street indices with the Dow Jones, S&P 500 and Nasdaq all snapping three-day losing streaks.
The busiest day for earnings sees Tesla and Alphabet kick off the Magnificent 7 reporting season. Read my Tesla earnings preview here. For Alphabet, it's going to be a familiar story of AI capex vs ad and cloud earnings growth. This is a key test for the market as the first hyperscaler to report earnings in the wake of the selloff in semis: is the AI capex supercycle still in play? AT&T, GE Vernova and ServiceNow are also slated to report earnings.
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