Originally published at: Market Roundup: Both UK inflation and the FTSE up - InvestEngine Insights
It was a mixed week for markets, with UK inflation data taking centre stage and the FTSE 100 reaching record levels. Here’s our Head of Investments, Andrew Prosser, with his weekly Market Roundup.
UK inflation edges higher
The Office for National Statistics reported UK inflation at 3.8% in July, up from 3.6% in June and slightly higher than the 3.7% expected. Rising food prices and airfares were the main drivers.
While inflation remains well above the Bank of England’s 2% target, it did little to shift expectations for monetary policy. Markets continue to see almost no chance of a rate cut in September, and the probability of cuts before year-end has dropped from 50% at the start of the week to around 36%. For now, interest rates look more likely to stay at 4% for the rest of 2025.
US tech weighs, UK equities shine
In the US, investor caution ahead of Nvidia’s upcoming earnings saw shares fall 3.5%, pulling broader markets down on Tuesday and Wednesday.
Interestingly, that dip provided a lift for UK markets. Investors rotated away from high-growth US tech into more defensive, dividend-paying UK stocks. Combined with a weaker pound, this helped the FTSE 100 close at new all-time highs on both Wednesday and Thursday.
All eyes on the Fed
The week ends with markets awaiting signals from the Federal Reserve’s annual Jackson Hole symposium. Fed chair Jerome Powell is due to speak later today, and investors will be looking for any clues on the central bank’s policy direction ahead of September’s meeting.
What this all means for investors
- UK inflation remains sticky, making rate cuts less likely in the near term.
- The US’ loss is the UK’s gain this week, as investors move away from tech (Nvidia) and towards defensive options in the UK.
- Volatility around central bank meetings and earnings results is likely to continue.
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