Rachel Reeves might not have enjoyed the images of her tear-streaked face being plastered all over the news, but she can take solace from the market reaction to the prime minister backing her to stay in her role as chancellor.
Borrowing costs, which shot up yesterday as investors priced in her potential departure from Number 11, have reversed course today, with a number of big names openly stating that they added to their gilt stash in a bet the turmoil would be short-lived.
There has also been better news from the UK service sector as the latest PMI figures came in hotter than expected, with both businesses and consumers feeling a little more confident about spending.
For once London’s blue-chip index was dominated by improved domestic sentiment – banks, retailers and housebuilders all made gains whilst global mining stocks slumped. The FTSE 100 ended the day 48.51 (0.55%) points higher at 8,823.20. Lloyds Banking Group was up 3.18%, NatWest rose 2.02% and Barclays gained 2.03%.
It was a similar story on the FTSE 250. External issues pulled down companies like Watches of Switzerland (down 6.98% despite record revenue) which is already seeing US retailers pushing through price hikes on its products.
The deadline for tariff talks is fast approaching and with the White House laser focused on getting that ‘big, beautiful bill’ signed into law investors might be nervous that the clock will run out before deals can be struck.
And whilst UK borrowing costs stabilised, a surprisingly resilient American jobs market has doused hopes that an interest rate cut might be around the corner and pushed US Treasuries into the spotlight.
Donald Trump has been highly critical of the current Fed chair’s stance because he knows adding to US debt would be a whole lot more palatable if borrowing costs were on the way down.
Non-farm payrolls in the US rose by 147,000 in June, according to the Bureau of Labor Statistics. The figure exceeded expectations of 110,000 and was broadly in line with the 12-month average of 146,000. The unemployment rate unexpectedly fell to 4.1%, defying forecasts for a rise to 4.3%.
This positive data suggests that tariff concerns haven’t slowed the US economy in the way many economists had anticipated. But those policies are only just filtering through to grassroots consumers and that adds credence to the ‘wait and see’ approach which to date has been favoured by the Federal Reserve.”
AIRLINES
It’s been a tough day for airlines and holidaymakers, with hundreds of flights being cancelled thanks to strikes by French air traffic controllers.
Ryanair looks set to be one of the worst affected airlines and its share price slumped on the news that thousands of hopeful travellers are likely to be disappointed if they were due to jet off over the next couple of days.
The disruption could have a knock-on effect to UK airports with available airspace narrower than usual and short haul flights particularly susceptible.”
NVIDIA
After all the gloomy predictions that this might be the year the AI bubble bursts, Nvidia’s found another gear. The chipmaker is on track to smash a coveted record and become the world’s most valuable company ever.
A resilient US economy and continued business spend on AI advances have helped boost investor sentiment, and as more and more of us find use for the tool in our everyday lives, demand for Nvidia’s powerful processors is only expected to keep increasing.
Danni Hewson is head of financial analysis at AJ Bell
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