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FTSE 100 set for slight fall as world shudders from US inflation shock

·2-min read

The FTSE 100 was set for another flat start today as Wall Street shuddered after inflation shot up to 13 year highs.

The London shares index was set to slip 6.3 points to 7119 at the opening of trading, according to futures markets, following US inflation data that came in higher than even the most pessimistic economists had predicted.

Bitcoin fell again, losing 3% to $31,955 in the past 24 hours.

US consumer prices jumped in June after surging prices of used cars and trucks due to the global phenomenon of strong pent up demand and supply shortages in the new car market.

The majority of experts continue to believe the price rises are temporary and that central banks will keep their policies super-easy with low interest rates and high quantitative easing.

Even so, Asian shares today fell after the US data, with some analysts there saying the tapering off of Covid support measures from the Fed could come sooner rather than later, impacting on US demand for goods across the global economy.

All eyes in that region will be on China’s second quarter economic growth data out tomorrow.

The Fed’s New Zealand equivalent - the Reserve Bank of New Zealand - surprised markets by saying it would end its QE bond buying programme from next week as part of a pathway out of special Covid measures. While that stance will be welcomed by hawks in the investment world, it makes the country an outlier and drove up the value of the kiwi dollar significantly.

Federal Reserve chairman Jerome Powell addresses Congress later today and tomorrow and will be quizzed on his intentions about how to halt inflation at a time when President Joe Biden keeps pushing for more fiscal stimulus to boost the economy.

Only last night, Democrats agreed a $3.5 billion infrastructure investment programme that will be debated with Republicans later in the summer.

Strong profit figures from JPMorgan, Goldman Sachs and Pepsico yesterday staved off a major fall on Wall Street markets despite the inflation shocker and futures markets suggested Wall Street could open modestly higher today.

UK inflation figures out this morning will probably dominate trading for most of today on this side of the Atlantic, while in the US, this afternoon sees the release of producer prices data which detail the prices American factories are charging for their goods. Analysts expect the June figure to come in at 5.1%, up from 4.8% before.

The Dax in Germany is set to open 30 points lower at 15,760 and France’s CAC 40 down 11 at 6547, according to CMC Markets data.

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