Lower inflation and pound, higher energy stocks

Signs that UK inflation is cooling down faster than expected in June led to a rally in London yesterday. CPI inflation dropped to 7.9%, while 8.2% was expected in the Bloomberg consensus. Core inflation eased to 6.9% from 7.1%, raising hopes that the BoE would end its rate hike cycle sooner rather than later. The cooler inflation data pushed the pound down, which benefited exporting companies. The FTSE 100 gained 1.8%, while the yield on 10Y Gilts was down 13bps to 4.198%.

The Bank of England’s next meeting will be in the first week of August, after the US Fed.

Overnight, disappointing results from Netflix and Tesla weighed on Wall Street. Netflix’s Q2 revenues were below expectations, while Tesla’s automotive gross margin was just in line with estimates.

However, there was some good news as China pledged to implement a set of measures to help private business and the overall economy.

This lifted mining and energy stocks this morning, pushing the FTSE 100 in the green at the open. In addition, miner Anglo American jumped 5.2% after it said its copper production climbed 42% in the first half.

Things to read today:

UK battles to reverse EU endorsement of ‘Islas Malvinas’ name (Financial Times)

Just When We Needed a Cooling Trend, Here’s the UK (Bloomberg)