Susannah Streeter, head of money and markets, Hargreaves Lansdown: ‘’There’s a swell of optimism at the start of the week, amid hopes for an easing of geopolitical risk and a more clement global economic environment. Indices in Asia have benefited from a big pulse of positivity, with the Nikkei hitting fresh record levels. As more certainty has returned to corporate Japan, given that a new tariff regime has been agreed, it’s helped boost stocks. The weaker yen has also been a positive force, given that it increases the value of profits made abroad. Car makers Toyota and Honda, as well as Uniqlo owner Fast Retailing, are among the biggest beneficiaries amid expectations that consumers overseas will keep snapping up their products given the greater clarity over pricing.
The FTSE 100 looks set for a small dose of Monday motivation, helping to erase some of Friday’s losses as investors take a glass half-full approach to the global economic outlook. Investors are also waiting for the upcoming Jackson Hole central banker meeting, for clues about the direction of interest rates in the United States, with expectations that recent data will pave the way for more cuts. Despite the fierce criticism he’s had to shoulder from President Trump, Fed chair Jerome Powell is not expected to set a firm path for rate reductions. He is likely to say he’ll stay driven by the latest inflation and jobs data available. Wall Street futures indicate a positive start for the S&P 500 and the tech-heavy Nasdaq, and there’s the potential for a push back up to record levels.
The future of Ukraine hangs heavy in the balance as Zelensky, flanked by European leaders, prepares to meet Trump. Putin’s high bar for a peace deal may scupper hopes for an end to the conflict, but with more details emerging about what land could be ceded or retained in Eastern Ukraine, there does seem be more substance to the talks. With less talk of tougher sanctions on Russia, oil prices dropped back as supply concerns faded, but amid the ongoing uncertainty Brent Crude has begun creeping higher and has headed back above $66 a barrel.
The fall in fuel costs since June will be welcomed by households, although it’ll take time to filter through to the pumps and may not fully show up in this week’s inflation figures in the UK. The Consumer Price Index is also influenced by how sharply costs fell last year, when prices also dropped significantly. Air fares have also been higher this summer as pent-up demand for travel continues. The Oasis tour, which saw high demand for hospitality around the gig dates has the potential to push up inflation in the sector during July. We are unlikely to see the Gallagher effect show up in quite the same way as Taylor Swift’s bump to prices in June 2024. But demand for hotel rooms, beer, bucket hats and nineties-style gear could be one of the factors that keep inflation heading higher. The Bank of England is forecasting that CPI will hit 4% next month, double its target, which is why another interest rate cut this year looks very touch and go.’’
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