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Traders have raised bets that the Bank of England (BoE) will cut interest rates in September despite a rise in UK inflation as the closely watched services inflation reading actually fell by more than expected.

The consumer prices index (CPI) rose for the first time this year to 2.2% in July, up from 2% in both May and June, according to the Office for National Statistics (ONS). This was less than the 2.3% rise expected by analysts.

Services CPI inflation dropped for a sixth consecutive month from 5.7% to 5.2%, having been forecast by analysts to fall to 5.5%.

Money markets now indicate that there’s a 45% chance that Bank will cut rates to 4.75% next month, from its current level of 5%. Before the inflation data came out, a September rate cut was only a 36% probability, according to City pricing.

Markets still think there are two cuts to come this year, which would bring the base rate down to 4.5%.

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More news in from the US...

A separate Labour Department report has showed the number of Americans filing new applications for unemployment benefits came in at 227,000 for the week ended 10 August compared with an estimate of 235,000.

Meanwhile, while the four-week average of claims, which smooths out week-to-week ups and downs, fell by 4,500 to 236,500.

Ronald Temple, chief market strategist at Lazard, an investment bank, said:

The Justice Department successfully argued that Google acted as an illegal monopoly. Now comes the tricky part: Deciding what to do about it.

DOJ attorneys are considering a number of options they could propose to US District of Columbia District Court Judge Amit Mehta as early as next month, according to reporting by Bloomberg and the New York Times.

The remedies range from an outright breakup of Google (GOOG, GOOGL) to forcing the company to make its search engine data available to competitors to ending agreements that secure its search engine as a default on mobile devices and internet browsers.

The DOJ and Google have until Sept. 4 to propose these or other changes to Mehta, who ruled earlier this month that the tech giant violated antitrust law. A hearing to discuss next steps is set for Sept. 6.

Read the full article here

US retail sales rose more than expected in July, jumping 1% from the previous month, in a sign that the American economy heading away from a recession.

Retail and food services sales hit $709.7bn (￡553.2bn), according to the US Census Bureau.

The rise was well ahead of economists’ estimates of a rise of 0.4%.

It indicates the economy bounced back from a downwardly-revised monthly fall of 0.2% between May and June.

The US dollar surged after the data release on the back of the news.

Norges Bank has kept interest rates steady 4.5%. Rates have been on hold at 16-year highs since December after inflation rose to 7.5% in October 2022, its steepest level since 1987.

Norway’s central bank also warned that it will likely hold rates “for some time ahead” amid fears over lowering prematurely.

Inflation has since fallen back to 2.8% in July, although this was up from 2.6% the previous month.

Jack Allen-Reynolds, deputy chief eurozone economist at Capital Economics, warned that Norges Bank was putting itself “at risk of falling behind the curve” on interest rate cuts. He said:

Aldi, the UK’s fourth-largest supermarket, has said it will end its UK click and collect service that was introduced in the wake of the pandemic.

It is currently available in 174 stores out of a total of 1,020, but the service will end on Sunday, as first reported by The Grocer.

Reuters reports that Britons have partly retreated from online grocery shopping since the heights of the pandemic:

More deals under 4% are now on the market for those wanting to become home owners following the Bank of England's decision to cut interest rates, with mortgage rates overall lower this week.

The average rate on a two-year fixed deal this week stood at 5.89%, lower than last week's 5.95%, while rates for a five-year deal came in at 5.20%, also lower than the previous 5.39%, according to figures from Uswitch.

The Bank of England cut interest rates to 5% at its August Monetary Policy Committee (MPC) meeting — the first reduction of the UK’s base rate in four years.

In a finely balanced decision, five committee members voted in favour of cutting rates, versus four who preferred to keep them unchanged.

Mortgage rates could fall to 3.5% by the end of the year as markets are betting on two more interest rate cuts by the end of the year.

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Oil prices steadied after a two-day decline as the market was gripped by uncertainty from the Middle East and China.

Traders have been unnerved by a potential Iranian attack on Israel as well as downbeat China data showing a decline in crude consumption.

Brent crude, the international benchmark, has risen as much as 0.6% today to more than $80 a barrel after falling by 3.1% over the previous two days.

US-produced West Texas Intermediate gained 0.6% to more than $77 amid concerns over how Iran might attack Israel over the killing of Hamas’ political leader on its soil.

Warren Patterson, head of commodities strategy for ING, said:

In equity markets, insurance group Admiral (ADM.L) surged to the top of the FTSE 100 as it posted a better-than-expected 32% rise in half-year pre-tax profits to ￡310m, driven by an improved current year underwriting performance and claims releases.

It also declared an interim dividend of 71p a share including a special payout of 19.7p a share, up 39%. Analysts had forecast profit of ￡304m and a dividend of 67.3p.

DCC (DCC.L) was boosted by an upgrade to 'outperform' from 'sector perform' at RBC Capital Markets following recent weakness.

Magners and Tennent's owner C&C Group (CCR.L) gained after saying it was on course to achieve its earnings expectations for the full year.

On the downside, Abrdn (ABDN.L), Anglo American (AAL.L), Rio Tinto (RIO.L), Barclays (BARC.L), Shell (SHEL.L), HSBC (HSBA.L) and Smurfit Westrock (SWR.L) all fell as they traded without entitlement to the dividend.

OSB Group (OSB.L) tumbled as it downgraded its net interest margin outlook. It said it now expects full-year underlying net interest margin of 230 to 240 basis points amid increased competition in the "subdued" mortgage market.

The UK’s trade in goods deficit widened by ￡7.8bn to ￡52.4bn in the April to June period, as imports of goods rose by more than exports.

The ONS said there was a rise in imports of machinery and transport equipment from both EU and non-EU countries, as well as a rise in fuel imports from non-EU countries.

Britain's trade gap with the European Union (EU) also widened. Exports to the EU increased by ￡1.4bn in June, to ￡15.6bn, while imports rose by ￡2.1bn to ￡26.9 in the month.

Bitcoin (BTC-USD) has continued its sell-off, despite stock indices such as the Nasdaq (^IXIC) and S&P 500 (^GSPC) ending Wednesday in the green following a US inflation print that met economists' expectations.

Bitcoin was trading just below the $58,000 (￡45,150) mark on Thursday, down almost 5%, according to Coingecko data.

Bitcoin had been trading within a narrow range above $61,000 leading up to Wednesday's release of the US Consumer Prices Index (CPI) inflation data. July's CPI increased by 2.9% year-on-year, marking the first time since 2021 that it has fallen below 3%.

The data appears to have supported equities, with anticipation growing amongst traders that the Federal Reserve will cut interest rates at its September meeting. Following the inflation print, the CME FedWatch tool shows that interest rate traders are now giving the likelihood of a 25bps rate cut at the next Federal Open Market Committee Meeting (FOMC) at 62.5%, and the chances of a 50bps cut at 37.5%.

Ethereum (ETH-USD) was trading within a tight range between $2,650 and $2,750 before Wednesday's inflation print, however, the price moved lower by around 5% on Thursday to around $2,600.

The global cryptocurrency market cap stood at $2.15tn, a decrease of 3.5%.

Evoke (EVOK.L), the owner of William Hill and 888 has revealed that its profits slumped 67% in the first half of the year.

The company, which was rebranded from 888 earlier this year, made core earnings of ￡43.8m for the six months to June, down from ￡130.8m this time last year.

Revenues dipped 2% to ￡862m as it continued with a turnaround plan launched in March. It said results were “disappointing and behind our initial plan”.

Contributing to the losses was the refocus on its core markets as well as what products it prioritises, it said, including selling its consumer-facing 888 gambling business in the US to gaming and betting company Hard Rock Digital.

It also spent ￡16m more on marketing. Earlier this year the firm added that it would invest in artificial intelligence to make the business more efficient.

Walmart (WMT) is set to report another solid quarter even as cautious consumers become more discerning with their dollars.

For its fiscal 2025 Q2, America's biggest retailer is expected to see revenue growth of 4.23% to $168.46bn, while adjusted earnings per share are expected to jump 5.22% to $0.65.

US same-store sales are expected to increase 3.41%, with Sam's Club up 3.9%, and its namesake business up 3.43%, according to Bloomberg estimates. Groceries remain a key business for Walmart, a major factor behind higher foot traffic and ticket size.

"Grocery, consumables, and essentials... will still be the key driver," Joe Feldman of Telsey Advisory Group told Yahoo Finance over the phone. "People are seeking value, people are trying to stretch their dollars."

UBS analyst Michael Lasser expects to hear the "consumer overall has been consistent."

"Keep in mind that Walmart sells mostly groceries and other household products, and it's taking market share, so what it has been experiencing is going to be a bit different than what other retailers have been experiencing," Lasser told Yahoo Finance.

Groceries account for roughly 60% of Walmart's US sales. This past quarter, it introduced a private label brand called Bettergoods, which offers healthier, higher-quality products at a $5 price point.

Read the full article here

• Japan: +0.8% growth in Q2

• US: 0.7% growth in Q2

• UK: +0.6% growth in Q2

• Canada: estimated to have grown by 0.5% in Q2

• France: 0.3% growth in Q2

• Italy: 0.2% growth in Q2

• Germany: contracted by 0.1% in Q2

Official data for Canada's second quarter growth does not come out until the end of August. Statistics Canada said the latest data suggests that the economy expanded 0.5% in the three months to June.

When adjusted for population changes, growth in the UK was less vigorous.

The ONS said on Thursday that real GDP per head is estimated to have increased by 0.3% in the second quarter which is only half as fast as the headline growth rate for the period.

Real GDP per head is 0.1% lower compared with the same quarter a year ago.

GDP per head, or per capita, is commonly used as a broad measure of average living standards or economic well-being.

Chancellor Rachel Reeves said:

In the first week after Labour’s election win, the chancellor promised to reboot the economy by making it the new government’s “national mission” to secure the highest sustained growth in the G7.

Today’s figures mean the economy continued to outperform France, Germany and Italy in the second quarter. However, the United States is the G7’s number one economy, which grew by 0.7%.

Germany, Europe’s biggest economy, shrank 0.1% in the three months to June, while the French economy expanded 0.3%c and Italy grew by 0.2%.

Despite the UK economy growing 0.6% in the second quarter, there was no growth at all in June as businesses delayed purchases until after the general election.

"In a range of industries across the economy, businesses stated that customers were delaying placing orders until the outcome of the election was known," the ONS said.

Strikes were also identified as a reason for the flatline. At the time junior doctors were still striking.

Yael Selfin, chief economist at KPMG UK, said:

The UK's economy grew by 0.6% between April and June as it continued its recovery from the recession at the end of last year.

Figures from the Office for National Statistics (ONS) show gross domestic product (GDP) continued to grow in the second quarter, after growth of 0.7% in the first three months of 2024.

Growth was led by the services sector, in particular the IT industry, legal services and scientific research.

Services were the biggest contributor to the UK's economy, rising by 0.8%, far outstripping manufacturing and construction, both of which saw an output fall of 0.1% between April and June.

Liz McKeown, the ONS director of economic statistics, said:

Stocks in Asia mostly climbed higher overnight, mirroring the positive sentiment on Wall Street thanks to easing US inflation data.

The Nikkei (^N225) rose 0.28% on the day in Japan as economic growth in Japan outpaced expectations, while the Shanghai Composite (000001.SS) advanced 0.9% by the end of the session.

Meanwhile the Hang Seng (^HSI) fell 0.1% in Hong Kong. Trading was closed in South Korea for Liberation Day, a national holiday.

Across the pond, US stocks were boosted by hopes that a big interest rate cuts from the Federal Reserve were finally around the corner.

The S&P 500 (^GSPC) rose 0.4% at at 5,455.21 and the Nasdaq Composite (^IXIC), which heavily represents tech companies, closed almost flat at 17,192.60. The Dow Jones (^DJI) ended 0.6% higher at 40,008.39.

The yield on benchmark 10-year US Treasury bonds eased to 3.83% from 3.85% late on Tuesday. It has been coming down since topping 4.70% in April, as expectations have built for coming cuts to interest rates.