Wednesday, 18 July: Inflation data in the UK dealt the pound another blow, in a week that political talk and Brexit woes have dominated the currency’s direction. A fall in clothing prices resulted in inflation remaining at 2.4% for the third consecutive month, below the 2.6% rise expected. Marrying up employment data from earlier in the week, wage growth is still growing ahead of inflation, although a rate rise from the Bank of England next month is looking more hesitant. Sterling fell to c.$1.30, down 0.3%, not fairing much better against the euro, down 0.3% at the time of the writing at €1.12.
The positive tone from US markets yesterday following hawkish comments from Fed chair Jerome Powell continued to an extent in Wednesday trade. In his semi-annual report to the Senate banking committee, Powell shrugged off trade war worries, adding he expects the Fed to raise rates gradually as economic data allows. The US has raised rates twice in 2018, with the next rate rise likely to be in September. The Dow Jones and S&P 500 are both higher at the time of writing; the latter approaching 6 month highs.
The weaker pound added to UK equity gains with the FTSE 100 adding 0.65% at the close despite a 7% fall in Smiths Group. New EU regulation and the loss of two US contracts has led the engineering group to expect a 2% fall in its Medical division revenue for the year ending 31 July. Overall revenue is reported to be up 3% in the 11 months to June 30, with no fall in margins expected as the company as a whole returns to growth.
A €4.34bn fine would be difficult for most to swallow. But this is what Google has been fined by the European Commission for abusing the dominance of its Android operating system. Alphabet are set to appeal the antitrust fine, but have been ordered to end its illegal conduct within 90 days, or face additional charges of up to 5% of its average global daily turnover. A quick look at Alphabet’s balance sheet and the fine seems manageable; the American giant has $101.87bn of cash and short term investments.