UK markets advanced slightly this week, with the FTSE 100 Index rising by 0.5% to trade at 8,995 points at the time of writing.
The FTSE 100 broke through the 9,000 barrier for the first time ever this week and continued to trade close to this level through to Friday as strength in energy, mining and retail stocks pushed the index higher, offsetting declines in the pharmaceutical space.
UK Payroll employment fell for the fifth consecutive month in June, with wage growth also slowing.
According to the Office for National Statistics (ONS), employers cut headcount by 25,000 in May and early estimates suggested that figure could rise to 41,000 for the month of June, leaving staff numbers 178,000 lower than the same period last year (a 0.6% decline).
This run of job losses has been cited by job lobbyist, Tina Mckenzie, Policy Chair of the Federation of Small Businesses, to be from the effect of the £25bn increase in national insurance contributions announced in the October 2024 budget, given that employers have cut jobs in seven of the eight months since the announcement.
Earlier in the week, UK inflation unexpectedly rose to an 18-month high of 3.6%, a setback for the Bank of England which is looking for scope to cut interest rates to support the country’s slowing economy.
Wednesday’s figure from the Office for National Statistics exceeded the prediction of analysts polled by Reuters that inflation would remain at May’s level of 3.4%. The increase was primarily driven by petrol prices and air fares, as well as the price of rail tickets.
Strong clothing and food prices also indicated companies are passing on increases from National Insurance and minimum wages to consumers, analysts said. Although this leaves the UK with inflation rates above other European economies, Sanjay Raja, Chief UK Economist at Deutsche Bank said the Central Bank would still likely cut interest rates next month.
Commodity markets
Brent crude oil futures rose toward $70 per barrel on Friday, extending an over 1% gain from the previous session, as markets weighed supply risks against ongoing concerns over US tariff policy. Drone attacks in Iraq’s Kurdistan region cut output by up to 150,000 barrels per day, while broader regional instability and Israeli strikes in Syria added to market jitters. Seasonal travel demand also lent support, with global consumption averaging 105.2 million barrels per day so far in July, according to surveys. Additionally, US crude inventories fell sharply last week.
Still, uncertainty over US tariffs–which may not be resolved until after August 1, and plans by major producers to unwind output cuts have limited upside momentum. Oil is also heading for a weekly loss of over 1%, the first in three, after President Trump gave Russia 50 days to agree to a ceasefire, easing fears of sanctions disrupting global supply.
Gold prices traded around $3,340 per ounce on Friday, on track for their first weekly loss in three, as strong US economic data reduced the urgency to cut interest rates. Retail sales rebounded more than expected in June, while weekly initial jobless claims unexpectedly fell to a three-month low, both signalling resilience in the economy despite the impact of tariffs. Reflecting this strength, Federal Reserve Board Governor, Adriana Kugler said it would be appropriate to keep rates steady for some time.
However, San Francisco Federal Reserve President Mary Daly maintained her outlook for two rate cuts this year. Nevertheless, safe-haven demand for gold remained supported by ongoing trade uncertainties with President Trump recently announcing plans to notify over 150 trade partners of their tariff rates. Geopolitical tensions, including the escalating Russia-Ukraine conflict and unrest in the Middle East, further enhanced gold’s appeal as a safety asset.
Equity markets
US stock futures were broadly up on Friday after Wall Street closed on Thursday, with the S&P 500 and Nasdaq hitting a fresh record amid solid retail sales and a further drop in jobless claims.
The US President has taken continual offensives against the Chair of the Federal Reserve, Jerome Powell this week, prompting swings in the Dollar and lifting longer-term inflation expectations. On Wednesday, the US Dollar, considered a proxy of the health the world’s biggest economy, tumbled 1.2% against a group of major world currencies immediately after reports that Trump was considering firing the chair.
The President later insisted it was “highly unlikely” that this would be the case, paring Dollar losses. Markets are still not convinced the role of Federal Open Markets Committee Chair is secure, with JP Morgan’s Chief US Economist Michael Feroli noting to his clients that “this immediate crisis may have passed, though we doubt we are entirely done with this saga”.
In other US news, President Trump said the US had reached a deal with Indonesia, the first preliminary deal to be made following the letters sent out last week to more than 20 trading partners informing them of US tariff levels if an agreement could not be reached by 1st August.
Before the proposed deal, Jakarta was facing tariff levels of 32%, however now the country will now face a reduced 19% whilst the US will face a nil rate. The President expects to make a number of other deals throughout next week with an agreement with India hopefully over the line ‘soon’.