Weekly Market Update 16/08/2024
UK headline inflation came in at 2.2% in July according to figures released by the Office for National Statistics on Wednesday. This was lower than the expected figure of 2.3% according to a poll from Reuters. Although inflation is still above the Bank of England’s 2.0% target, the sharp fall in pricing pressures may yet see further interest rate cuts this year.
The main contributor to the fall in headline inflation was the sharp decline in services inflation which fell from June’s figure of 5.7% to 5.2%, much lower than any forecasts, and the lowest it has been since June 2022. The BoE uses service inflation as the key measure of domestic price pressures, with the persistently higher figure indicating strong wage growth, and therefore leading to the BoE’s cautious approach to rate cuts.
The ONS also released GDP data on Thursday, which saw the UK economy grow 0.6% in the second quarter of the year, compared with the slightly higher 0.7% in the previous quarter. Monthly GDP in June was flat, but this was in line with analysts’ expectations. After last year’s technical recession, the economy continued to grow this year, with British retail sales rebounding in July according to further figures from the ONS.
This week, AstraZeneca became the only current UK-listed company to reach a valuation of £200bn. Shares in the company have risen almost 20% this year as investors look to the future earnings of the company’s advanced oncology drugs, and the success of their cancer and diabetes treatments. Vodafone and Shell have both previously breached the £200bn valuation threshold before falling back, in 2000 and 2018 respectively. The company’s price to earnings ratio is at 18.9 times, which although ahead of rivals, is still behind Novo Nordisk and Eli Lilly who have benefited from sales of weight-loss drugs.
Andrea Wood, Chartered MCSI
Investment Manager
