Quilter Cheviot|Weekly Comment

The Middle East, inflation and the Fed

Our weekly market overview from Quilter Cheviot

By Richard Carter, Head of Fixed Interest Research

Markets have remained focused on the worrying events in the Middle East although generally the reaction has so far been limited to a modest rise in the oil price and some flight to safety demand for government bonds and gold. Investors are hoping that the US and other nations will be able to stop the conflict drawing in other countries in the region but the situation is likely to remain tense for a while yet.

Away from the Middle East, we continued to see robust economic data from the United States while the latest inflation numbers were worse than expected with headline CPI up 3.7% on the year. Investors still expect the Fed to remain on hold at the next meeting in November and this was supported by the latest comments from Fed officials. The Bank of England is also expected to keep rates unchanged for the rest of the year although clearly a further rise in the oil price could affect their thinking.

Looking ahead, we are on the cusp of earnings season so analysts will be on the lookout for any signs of slowing demand. Events in the Middle East will dominate on the macro side with the next central bank meetings still a couple of weeks away.

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