SpaceX cleared for launch.

The World Cup is off and running. Mexico hosted South Africa, and the hosts prevailed easily, as the first game produced more red cards than goals. Games will come thick and fast, and trying to watch many of them will keep you up through the night. Spain and France are the favourites to lift the trophy when the tournament ends in mid-July. Not everyone finds football an enjoyable game to follow, but somehow the World Cup seems to capture most people’s imagination.

As for stock markets, the roller coaster continues, with prices reacting to ever-changing headlines. One minute, Trump announces all sorts of threats against Iran, the next, declares a deal is almost done.

What is beyond doubt is that higher energy prices are influencing inflation rates; the debate is whether it is transitory and will feed through into secondary effects, and how central bankers should react. On Wednesday, headline US inflation climbed again to a 3-year high of 4.2%; however, markets seem encouraged by the core rate, which excludes the effects of energy prices, suggesting, at present anyway, that higher energy prices will not lead to a widespread bout of persistent inflationary pressure. Then yesterday we had further inflation data in the form of producer prices, which painted a slightly different picture as year-over-year, prices rose 6.5%, the largest 12-month advance since November 2022. How did the market react to both reports? There was little movement in the US dollar basket, and 2-year yields fell, indicating the market does not believe these reports put any further pressure on Mr Warsh to raise interest rates, and that he can stick to his view that energy effects will be transitory and that growth in AI will dampen inflationary pressures.

The ECB, on the other hand, did raise interest rates on Thursday, much as the market had anticipated, and expectations are now for further hikes for the rest of the year, as the ECB does fear the 2nd-round effects of higher energy costs. The eurozone economy is hardly bouncing along, so does this move have the hallmarks of 2011? They risk repeating the policy mistakes they made in July of that year, raising interest rates in response to an energy shock, thereby putting further pressure on a weak economy. Having to reverse the decision later.

The Fed will not raise interest rates next week. The question is which path the Bank of England will follow: the Fed’s path, hoping that higher energy costs will not have 2nd-round effects and keep rates unchanged, or the ECB’s, which fears they will. We shall know next Thursday. How much will today’s mixed GDP report influence their decision?

Finally, SpaceX gets off the ground today with a $75 billion capital raise at a $1.75 trillion valuation, as it makes its much-anticipated launch. The biggest stock market floatation on record by some margin.