Stock markets experienced volatility on Friday as US data revealed a larger-than-expected increase in wholesale inflation, leading traders to evaluate the likelihood of further interest-rate hikes this year. Government data released on Friday showed that wholesale prices in the United States rose in July, largely due to a surge in services costs. The US markets closed mixed, with the Nasdaq Composite Index, which focuses on technology companies, falling by 0.6 percent to end the week at 13,644.85. While producer prices have decreased significantly since last year, consumer inflation has been slower to decline, causing a mixed reaction in the financial markets. Adam Sarhan from 50 Park Investments commented on the situation, stating, “We had higher-than-expected inflation data, but the market was caught off guard because yesterday’s (consumer) inflation data came in lower than expected. So the market likes certainty, and right now we are experiencing a lot of uncertainty regarding inflation.” European stocks also ended the week in the red, as did the Hang Seng and Shanghai composite indexes. In Britain, better-than-expected growth data increased the likelihood of the Bank of England implementing further interest rate tightening. The Office for National Statistics reported that gross domestic product grew by 0.2 percent from April to June, with strong output in June contributing to the growth. Joshua Mahony, chief market analyst at Scope Markets, commented on the GDP data, stating, “Today’s GDP data helps support the idea that the UK may be on track for a soft-landing similar to what is currently being seen in the US. However, this soft-landing narrative could result in a more prolonged tightening period, as the Bank of England faces no pressure to ease off its current path of raising interest rates.” In the United States, consumer prices increased last month but by less than analysts anticipated, providing the Federal Reserve with room to take a more moderate approach to monetary policy after a year of rate hikes. While it is widely expected that policymakers will not raise borrowing costs at their upcoming meeting, analysts believe that additional rate hikes later this year are still possible due to the tightness in the labor market. In Asian stock market trading, Hong Kong experienced further losses on Friday, despite e-commerce company Alibaba performing well due to better-than-expected revenue. The Tokyo stock market was closed for a public holiday. Oil prices rose as the International Energy Agency increased its forecast for global oil demand growth this year, despite the weakened state of the Chinese economy. Craig Erlam, senior market analyst at Oanda, commented on the rise in oil prices, saying, “Oil prices have increased by more than 20 percent since late June, driven by the actions of OPEC+ and the additional cuts made by Saudi Arabia and Russia, which have been extended to September.”
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