Market Moves: Britain's Inflation Numbers, Oil Prices, China's Economic Problems

(a daily blog post featuring important news stories in the financial markets)

Bottom Line Bulletin

  1. UK Reports Lower Inflation Numbers, Staves Off Interest Rate Increases


Reuters Graphics


Britain’s high rate of inflation fell by more than expected at 7.9%, easing the pressure on the Central Bank of England to continue raising interest rates. The BoE projected this number in May, moving further away from October’s high of 11.1% but still many ways off of its 2% target. As a result the sterling was down by more than 0.5% against the US dollar, and was the lowest it has been against the euro since May. As a result of the inflation numbers, a 0.25% increase in interest rates is more likely than a 0.5% increase which had been previously predicted. Core inflation, which excludes food and energy, also dropped to 6.9%, another good sign for the British economy. Despite this drop in inflation, Britain still has the highest inflation rate compared to the seven richest economies in the world.


  1. Oil Prices in a Tug of War Between Supply and Demand


Global oil prices remained flat on Wednesday, as markets weighed the US demand concerns with China’s pledge to support economic growth. The US demand concerns that are restricting oil price gains are likely to remain, with the US Federal Reserve likely to raise interest rates in July again. China did pledge to roll out policies to “restore and expand” consumption in the economy following their disappointing second-quarter GDP numbers. These policies have the potential to boost oil demand. If the stimulus in China is successful, oil will increase in price, even through a European recession. As for supply, last week data from the American Petroleum Institute (API) showed crude oil and gasoline inventories all fell last week. The expected 2.3 million barrels from last week was only 800,000 barrels.


  1. China’s Cautious Consumers are Dampening the Global Economy


According to Albert Park, a chief economist at the Asian Development Bank, China’s cautious consumer confidence has been dampening its fragile economic recovery. Monday’s GDP numbers have set up alarm bells in the global economic sphere, as China’s numbers missed expectations, with their economy growing just 6.3% from Q2 2022, while retail sales in June grew 3.1%, fueling the concerns that the Chinese economy is struggling to grow post-Covid. Park furthered that the global economy needs China’s consumers and businesses to regain confidence to start spending and investing more. As a response to China’s faltering growth, the central bank lowered interest rates to help stimulate the economy. China still has to keep an eye out on their debt, as they still have very elevated debt levels following the pandemic.


  1. Bonus Bulletin: Microsoft and AI


During the business hours Tuesday, Microsoft shares rose 5.8% after the company announced a new AI subscription service as part of Microsoft 365. Costing users an additional $30 per month, users will receive generative AI help with Microsoft services, including Excel and Word. This generative AI assistant could increase monthly prices for business customers up to 83%. The assistant, Copilot, is capable of ranking incoming emails, summarizing meetings, analyzing spreadsheets, and helping write and designing presentations. This new development is the latest thing in the “AI race” between tech giants, Microsoft, Google, IBM and more.

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