US Inflation Boosts Market Prices Amid UK Economic Uncertainty

The recent US inflation data has provided a boost to market prices, with European equity markets hitting fresh record highs and the S&P500 poised to retest 7,800. The slowdown in US CPI inflation to 3.4% in July, coupled with core prices slowing to 2.5%, has diminished the likelihood of a Federal Reserve rate hike next month. However, some policymakers continue to suggest that a rate increase is still possible.

The UK's inflation outlook remains uncertain, with the 13% energy price cap rise set to push headline inflation back towards 3%. The upcoming release of UK CPI for July will be closely watched, as well as retail sales and public borrowing figures. Meanwhile, US retailers Home Depot, Target, and Walmart are set to report their Q2 earnings, which could impact market expectations.

Youth unemployment in the UK has risen to 14.8%, while the overall unemployment rate remains at 4.9%. The divergence between public and private sector wages continues to widen, with public sector wages increasing to 5.5% and private sector wages slowing to 4%. This unsustainable trend may lead to a reckoning in the long term.