US Retail Sales and UK GDP Key for Fed, BoE

Investors are closely monitoring US retail sales and UK GDP data, as these reports will heavily influence expectations for rate cuts by the Federal Reserve and Bank of England. Mild US inflation data has solidified market belief in an upcoming Fed rate cut, while weaker-than-expected UK inflation has raised speculation of faster BoE rate cuts. The US dollar weakened against the euro, and sterling fell against the euro due to these economic factors.

Equities

The FTSE 100 rose by 0.6% on Wednesday, marking its fourth consecutive day of gains, supported by softer UK consumer price data for July. This data strengthened expectations that the Bank of England might cut interest rates at its next meeting. The midcap FTSE 250 index also performed well, climbing 1% and closing at a two-week high. Homebuilders were among the top gainers, with the sector up 3.4%, as the lower inflation figures eased concerns about future interest rate hikes. However, industrial metal miners slipped nearly 1% due to a drop in Chinese lending, which weighed on base metals.

Flutter Entertainment surged 10.5%, recording its best day in eight months after the online betting giant raised its full-year outlook following a better-than-expected second quarter. Playtech also saw a significant boost, jumping 13.7% to lead the mid-cap index. This rise came after Flutter entered talks to purchase Playtech's Italian unit, Snaitech.

In the United States, the S&P 500 climbed 0.38%, closing higher for the fifth consecutive session at 5,455.21 points. The Nasdaq Composite edged up 0.03%, despite being weighed down by Alphabet, whose shares dropped 2.3% following reports that the US Department of Justice is considering breaking up Google. Other major tech stocks had mixed results: Tesla fell by 3.1%, while Microsoft and Nvidia dropped 0.7% and 1.7%, respectively. Meta Platforms saw a slight decline of 0.3%.

The Dow Jones Industrial Average also saw gains, rising by 0.61% to close at 40,008.39 points. Among the standouts in the S&P 500, financials led the sectors with a 1.3% rise. Progressive and Charles Schwab gained over 4.6% after reporting positive July performance numbers, while Allstate climbed after agreeing to sell a business unit. Both Progressive and Allstate reached record closing highs.

Meanwhile, Kellanova shares surged 7.8% after Mars, the family-owned candy giant, announced plans to acquire the Cheez-It and Pringles maker in a nearly $36 billion deal. Cardinal Health also gained 3.7% after the drug distributor raised its profit forecast for 2025.

Forex & Commodities

The US dollar softened against major currencies, with the euro reaching a near eight-month peak at $1.1014, as inflation data showed that US consumer prices rose moderately in July. This added to expectations that the Federal Reserve will cut interest rates next month, though likely at a more measured pace than previously anticipated. The dollar index slipped slightly to 102.57.

Sterling dipped 0.29% to $1.2825 against the dollar after UK inflation data for July came in lower than expected, dampening the pound’s performance despite the weaker dollar. The euro also strengthened against sterling, rising 0.47% to 85.87 pence.

Gold prices regained ground, supported by the softer US dollar and lower Treasury yields. Spot gold rose 0.2% to $2,452.69 per ounce, while US gold futures climbed 0.4% to $2,490.10, as investors continued to anticipate potential Fed rate cuts.

Oil prices edged higher, with Brent crude up 0.24% to $79.95 a barrel and US West Texas Intermediate crude increasing by 0.3% to $77.21 per barrel. Optimism around potential US rate cuts supported the market, despite ongoing concerns about global demand, particularly from China, and rising US crude inventories.