Global equity returns were negative last week as inflation fears once again came to the fore, following the latest data release from the US. Core inflation (which excludes food and energy) rose 0.9% in June, which was approximately twice what was expected. This also translates into an annualised rate of 4.5%, which is the fastest rate in 30 years. Whilst used cars accounted for a large portion of the figure, there were increases across the board as the concept of inflation being ‘transitory’ continues to be questioned by some market participants.


Interestingly, 44% of small US businesses have also indicated that they are putting plans in place to raise prices – the highest reading in over 40 years.  Fed Chair Powell soothed some market concerns as he appeared before Congress later in the week. It is also worth noting that Treasury Yields fell last week, which suggests the bond market may believe that price increases have peaked. However, inflation looks set to be the main topic of conversation for the rest of the year.


Elsewhere data was mixed, as manufacturing activity missed estimates whilst retail sales rose 0.6%, versus a consensus forecast of -0.4%. The Bank of Japan kept interest rate policy on hold, but in keeping with recent moves from policymakers globally, did release a statement on climate strategy which included a number of incentives to help shift towards a greener economy. Earnings were broadly positive last week, led by some of the big US financials. However, they weren’t necessarily rewarded in terms of price action as macro factors dominated the week’s market agenda.


The UK remains on course to lift remaining COVID-19 restrictions today, amidst strong criticism from health officials as delta variant case numbers continue to rise. France, the Netherlands, and Germany have paused reopening for the time being as parts of the continent start to recover from strong flash flooding last week. Click Here