Weekly Digest: Big Surprise for U.K. Inflation, Grain Deal Collapse


10 minutes read

Jul 21, 2023

A stack of 1 pound coins and Bank of England notes

22/07/2023: U.K. inflation rate slides to 7.9% in June, Russia attacks Ukraine’s critical ports after exiting grain export deal, gold backs down amid uncertainty over the Fed pausing its rate hikes. And more.

💡Quote of the week

“Inflation can go down as well as up, and not just in the U.S. The response in the U.K. has been to put out more flags, much as if the country had just won a great military victory… The results were indeed better than had been expected and marked the biggest positive surprise on U.K. inflation in two years. But they’re still worse than in the eurozone, and the fall in core inflation was only 0.2 percentage points.” - John Authers, senior editor for markets

Investment news

Woman doing grocery shopping

🇬🇧 📉 Finally! U.K. inflation cooled significantly in June, coming in below consensus expectations at 7.9% year-on-year. Core inflation, which excludes the volatile prices of energy, food, alcohol, and tobacco, remained sticky at an annualized rate of 6.9%. (CNBC)

According to the Office for National Statistics, the main factor leading to a decrease in the monthly change of the Consumer Price Index (CPI) annual rate was the decline in motor fuel prices. On the other hand, food prices increased in June, but the rate of increase was lower compared to the same period last year.

Gold backs down. Gold prices took a hit on Friday as the dollar surged to its highest level in over a week. The reason behind this surge was the release of positive weekly U.S. jobs data, which sparked uncertainty about whether the Fed would continue raising interest rates.

“If the Fed lends credence to market expectations for no further rate hikes after this month, that may help bullion bulls reclaim the $2,000 handle,” Exinity Chief Market Analyst Han Tan said as quoted by Reuters.

🇪🇺 Investors eye corporate earnings, Spanish election. European markets were flat on Friday as investors processed recent corporate earnings and awaited a crucial Spanish general election happening over the weekend. (CNBC)

The pan-European Stoxx 600 was unchanged by early afternoon, with mining stocks shedding 1.6%, and oil and gas stocks adding 0.7%.

In early premarket trade, U.S. stock futures showed a small increase after the Dow Jones Industrial Average completed its ninth consecutive day of gains, marking its longest rally since 2017. But both the S&P 500 and Nasdaq closed the day with negative performance.

🇺🇸 U.S. recession predictions waver as inflation ebbs and economists remain divided. Economic forecasters who previously warned of a looming US recession are now hedging their bets, as inflation subsides and the economy displays resilience. The uncertainty has led experts from prominent institutions such as Deutsche Bank, Fannie Mae, and Nomura Securities International to revise their outlooks. (Bloomberg)

Meanwhile, economists surveyed by Bloomberg show increased optimism, with expectations for GDP growth in the second and third quarters being revised higher. Despite these improvements, most of them still see a chance of a recession within the next 12 months.

Economists now anticipate that the Federal Reserve will implement fewer rate cuts next year.

Netflix logo on a monitor screen

📽️ Media Industry Braces for Earnings Season Turmoil. As the media industry gears up for earnings season, a perfect storm of challenges looms large. Two Hollywood strikes, plummeting ad revenue, and unprofitable streaming services have created a tumultuous landscape. Even Disney CEO Bob Iger has hinted that legacy TV may no longer be central to the company's vision. (CNBC)

Amidst this uncertainty, Netflix emerges as a standout performer in an otherwise troubled landscape. Investors and stakeholders will closely monitor how companies navigate these challenges and seize opportunities for growth.

“Netflix is poised to do better than most because they produce shows so well in advance. And if push comes to shove, they can rely on international shows, of which they have so many. Netflix is the antagonist in the eyes of strikes because of how it changed the economics of what writers get paid,” Insider Intelligence analyst Ross Benes said.

🌾Escalating Black Sea tensions rattle grain markets as wheat prices fluctuate. Wheat prices experienced a 3% decline due to Ukraine's efforts to keep its grain-export deal intact, after Russia exited the agreement amid mounting military risks in the Black Sea region. (Bloomberg)

Despite the dip, wheat is still poised for a 7% weekly gain, driven by uncertainties arising from military drills and geopolitical turmoil in the region.

A year-long deal enabling Ukraine to safely export its grain via the Black Sea expired on Monday after Russia withdrew and warned it could not guarantee the safety of ships exporting grain.

📸 Image of the week

A meme mocking government taxes


Wheat field with blue sky

🤔 Wheat as a weapon: Putin's grain embargo won’t hurt the world? Wheat, the world's vital staple, has become a weapon in geopolitical conflicts, with recent tensions between Russia and Ukraine putting the grain trade at risk. The collapse of the grain corridor and overland routes for Ukrainian exports could cost Ukraine significantly, and the international community must grapple with complex options to address the crisis. (Bloomberg Opinion)

“If sending NATO warships is too risky, what else the West can do? Frustratingly, its best hope is that global food prices rally, and the Global South – particularly the likes of India, Saudi Arabia and Egypt – put pressure on the Kremlin,” Bloomberg’s Javier Blas writes.

What else is happening

a man casting a ballot at an election

🇪🇸 Will Sanchez’s political gamble pay off? Spain's upcoming general election on Sunday could mark a major shift in the country's political landscape, with the possibility of a swing to the populist right after five years of left-wing government. (AP)

Prime Minister Pedro Sanchez called for early elections following his party's defeat in local and regional elections. The center-right Popular Party is leading in polls, but it might need support from the far-right Vox party to form a government. A coalition with Vox would be the first far-right force in Spain since the post-Franco era, and it could have implications for EU policies on immigration and climate change.

🇸🇪 Protesters storm Swedish embassy in Baghdad over planned Koran burning. Angered by the planned burning of a copy of the Koran in Stockholm, protesters stormed the Swedish embassy in Baghdad, setting it on fire. Demonstrators breached the embassy's compound, holding flags and signs of influential Iraqi cleric Muqtada al Sadr. (AP)

Videos on social media captured the chaos as the building went up in flames, with protesters brandishing copies of the holy book. The Swedish foreign ministry confirmed the safety of all staff, condemning the attack on diplomatic missions, while Iraq expelled the Swedish ambassador from the country over the incident.

And finally…

Terminator 2: Judgment Day

🦾Move over, terminator: self-healing metal becomes reality in nanoscale experiments. In a remarkable breakthrough, scientists have discovered self-healing abilities in metals during nanoscale experiments. Similar to the iconic T-1000 android from "Terminator 2: Judgment Day," metal pieces made of platinum and copper spontaneously repaired cracks caused by metal fatigue. This groundbreaking discovery could lead to self-healing machines in the near future, revolutionizing industries like aviation and infrastructure. (Reuters)

"Given this new knowledge, there may be alternative material design strategies or engineering approaches that could be devised to help mitigate fatigue failure. In addition, this new understanding may shed light on fatigue failure in existing structures - improving our ability to interpret and predict such failures," Sandia National Laboratories materials scientist Brad Boyce said.


See you next week!


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