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Further rate cuts expected despite inflation uptick
Analysts expect the Bank of England will cut base interest two more times this year, after data showed inflation ticked up at a slower rate than expected last month.
Services inflation subsided from 5.7% to 5.2% between June and July, as overall consumer prices edged up from 2% to 2.2%, according to the ONS... Read more
“The decline in services inflation [...] was much bigger than anyone anticipated,” Capital Economics deputy chief Ruth Gregory noted, highlighting the metric as key for policymakers.
“This may not alleviate the Bank’s concerns about persistent price pressures entirely. And it probably isn’t enough to prompt a back-to-back interest rate cut in September,” she added.
“But it does lend some support to our view that inflation will be back below [...] target next year and that interest rates will fall further and faster than markets expect.”
Validus Risk associate Pierre Roke said subsiding services inflation could open the door for up to two further cuts before the year-end, with wider markets also pricing in a similar scenario.
Such expectations are currently for the Bank of England to avoid a cut in September, following August’s reduction, with these coming later in the year.
That said, Deutsche Bank (ETR:DBKGn) analysts argued further labour market and inflation data before rate setters next meet on September 19 could upend these.
“A September rate cut should no longer be off the table,” the bank said, “it’s entirely conceivable to think that we could get multiple more rate cuts this year”.
Flutter soars as profits spike, guidance upped on US demand boom
Flutter Entertainment PLC (LON:FLTRF) jumped 10% on Wednesday morning after overnight results showed a spike in profits and signalled strong growing demand across the Atlantic.
Second quarter revenue jumped 20% to US$3.6 billion (£2.8 billion), while net income soared more than four-fold to US$297 million.
US revenue jumped 39% to US$1.5 billion, while in the UK and Ireland this was up 17% at US$928 million.
“Our US performance was excellent in new and existing states reflecting our disciplined approach to customer acquisition and our best-in-class product,” chief executive Peter Jackson said.
This comes after the Paddy Power , Betfair and FanDuel-owner completed the move of its primary listing from London to New York earlier this year.
“This reflects the importance of the US market to Flutter and our view that the US is the natural home for our business.”
Flutter also hiked guidance to reflect an expected 20% and 34% increase in full-year revenue and adjusted pre-tax earnings respectively.
London-listed shares jumped 10% to 16,130p.
Sports spending booms during Olympics
Spending on sports clubs and gyms accelerated in July, data from Revolut has revealed.
Some 38% more was spent in July on such activities than a month earlier, the finance app said Wednesday, coinciding with the start of the school holidays and the Olympics in Paris.
“We’ve seen a clear shift towards more affordable and active leisure activities, as many get into the sporting spirit,” Fiona Davies, Revolut head of UK, Ireland and Nordics growth, commented.
Spending on gyms was up 18% over the month, while transactions at sports retailers increased by 11%.
This was as total monthly payments ticked up 16% compared to a year earlier.
Amusement parks, aquariums, museums and cinemas also got a boost compared to June as the school holidays got underway, Revolut said, with spending at fast food restaurants also up.
Stocks rise on slower-than-expected inflation
The FTSE 100 got a boost on Wednesday morning, after ONS data showed inflation picked up for the first time this year in July, but at a slower pace than expected.
London’s blue chips added 42 points early on, sending the FTSE 100 to 8,277.
The FTSE 250, 350 and AIM indexes also climbed as trading got underway on Wednesday.
This was after ONS data showed a 2.2% uptick in inflation over the year to July, from 2% in May and June respectively, but below expectations for a 2.3% increase.
Validus Risk Management associate Pierre Roke noted a lower-than-expected service inflation print, of 5.2% against analysts’ 5.5%, could spell good news for further Bank of England rate cuts this year.
“[This] validates the more dovish committee members and potentially leaves room for not just one more cut this year but two.”