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“The spectre of inflation has returned to haunt markets after a period when investors’ attention has largely been centred elsewhere,” says AJ Bell Investment Analyst Dan Coatsworth.
“A higher-than-expected inflation reading in the US yesterday is one of the first data points to suggest tariffs are beginning to have some impact on prices. While this impact looks fairly modest for now, this reading obviously comes before the more onerous levies on imports which are currently lined up for introduction at the beginning of August.
“UK inflation increasing to an 18-month high in June thanks to higher fuel and food prices will only reinforce concern about inflationary pressures as the market weighs the potential impact on interest rates.
“The FTSE 100 was steady after beating a rapid retreat from the 9,000 mark yesterday afternoon. Wednesday saw miners Antofagasta and Rio Tinto higher on positive production numbers, while heavyweight stock AstraZeneca dragged on the index after a late-stage trial on an experimental treatment for a rare condition failed to meet its primary target.
“Factory gate price data out in the US later on will be closely monitored. When producers charge more for goods and services, this tends to get passed on to consumers down the line.”
ASML
“ASML, which makes the high-tech kit used in the manufacture of leading microchips, may be facing a more limited impact from tariffs than it anticipated. However, in the longer term, global economic uncertainty is still hurting the business.
“Third-quarter guidance was meaningfully below forecasts and the company was unable to confirm whether it would deliver any growth at all in 2026. There is a chance that ASML is showing an abundance of caution to help manage expectations, but some investors were not sticking around to find out.
“ASML remains an important cog in the wheel for the chip and AI industry. The advanced lithography machines it makes cost a fortune and are crucial in the semiconductor fabrication process. It is pretty much the only company in the world capable of manufacturing the EUV (extreme ultraviolet) tools needed for printing bleeding edge, complex semiconductor chips driving the modern world.
“EUV lithography machines require months to build and set up in chip foundries which themselves cost billions. Operators must run these machines continuously to recoup their investment, so they only place orders with ASML when future demand is likely to justify full utilisation at least 12 months into the future. The current uncertainty is therefore unhelpful.”
McBride
“There was big demand for supermarket own-brand products between 2022 and 2023 when the UK experienced a sharp rise in the rate of inflation. As a provider of white label goods to supermarkets, cleaning products specialist McBride enjoyed a purple patch as shoppers shunned big brands and went for the cheapest options. It’s unfortunate that McBride has now disappointed the market precisely at the point where inflation has reared its ugly head again.
“There is a line in its trading update that implies the supermarket own-brand boom is past its peak and is now reverting to more normal trends. Investors have taken that remark to mean McBride’s glory days are over.
“Given we’ve just seen inflation hit its highest level in a year and a half as food prices rise again, there is a real chance that shoppers will once again think twice about what they put in their basket. That would imply McBride could bounce back, yet investors don’t seem to share this view given how the share price has crashed on the update.”
Dan Coatsworth: Head of Markets
Dan Coatsworth is AJ Bell's Head of Markets. Dan has been with the company since December 2012 and has more than 18 years' experience in the industry, following the markets and all things investing. He...
