Originally published at: This week in charts: UK inflation back in the news – InvestEngine Insights
UK inflation higher than expected
UK inflation surged to 2.3% in October, up from 1.7% in September, driven by rising energy costs, reinforcing market expectations that the Bank of England will delay further interest rate cuts until next year. The annual consumer prices index increase exceeded analysts’ predictions of 2.2%. This rise was influenced by a 10% hike in Britain’s energy price cap last month, affecting millions of households’ gas and electricity bills, as well as higher prices across the transport, household goods, recreation and hotel sectors.
Services inflation, a key indicator of domestic price pressures, reached 5% in October. Core inflation also rose to 3.3% in October, above the anticipated 3.1% and up from 3.2% in September.
The Bank of England has emphasised a “gradual” approach to achieving its 2% inflation target, with MPC members reaffirming that the UK remains on track for low inflation despite volatile price growth. Governor Andrew Bailey echoed this cautious stance, highlighting the need to assess the impact of Rachel Reeves’ Budget.
Earlier this month, the BoE reduced interest rates by 0.25% to 4.75%, but indicated no further cuts are likely before early 2025. Their next decision on rates is due on December 19, with investor expectations of a December cut falling slightly from 20% to 13%, based on options market data.
Bitcoin almost reaches $100,000
Further optimism surrounding Trump’s supportive stance of the cryptocurrency industry pushed crypto prices higher this week. Rumours that his team have been holding discussions with the digital asset industry about whether to create a new White House post solely dedicated to cryptocurrency policy pushed Bitcoin prices to within touching distance of $100,000.
While the FCA has banned the sale of funds investing directly into cryptocurrencies for retail investors, investors can capture the cryptocurrency enthusiasm through digital asset and blockchain ETFs. Invesco’s BCHS ETF, which provides diversified exposure to companies in the blockchain ecosystem, is up almost 30% this year:
Nvidia beats estimates, but still falls
Nvidia, the largest company in the world, reported earnings on Wednesday evening. Revenue for the quarter to the end of October nearly doubled from a year ago, up 94% to $35.1bn, buoyed by high demand for their chips, which are relied on heavily for artificial intelligence software. It was a slower pace of growth from the previous quarter, but still well above analysts’ expectations for $33.25bn.
Despite these strong earnings, the market has high expectations for Nvidia, and the shares were down over 2% on Thursday when the market opened. Luckily for investors, the results were strong enough that the narrative surrounding artificial intelligence’s meteoric growth was maintained, and did not lead to any contagion over fears over an AI slowdown.
The strong growth for AI companies has benefitted the wider technology sector this year, with the Xtrackers MSCI USA Information Technology ETF (XSTC), now up over 30% so far for 2024.
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