FTSE 100 outperforms as sharp decline in UK inflation points towards faster easing

• European markets struggle after US semiconductor selloff.

• Earnings season proving difficult thus far, following ASML and UHG led declines.

• FTSE 100 outperforms as sharp decline in UK inflation points towards faster easing.

Mainland European markets have opened on a somewhat downbeat tone following the US session that saw a tech sell off driven by the unexpected early release of earnings from Dutch manufacturing giant ASML. In a week that had started with Nvidia hitting fresh record highs that brought the market capitalisation up to a lofty $3.4 trillion, we have since seen the semiconductor stocks hit hard after ASML booked less than half the orders expected by the market. Unfortunately, another dark spot for US markets came from the healthcare providers, with UnitedHealth Group stock tumbling on rising costs. All-in-all, this has been a tough week for earnings thus far, with early indications from these two companies providing markets with ammunition to shift into a defensive risk-off mindset. Looking ahead, tomorrows TSMC earnings provide yet another leading indicator of semiconductor demand, as we await numbers from a manufacturing giant that counts Apple, Nvidia, and Qualcomm as clients.

The FTSE 100 leads the way in early trade, pushing sharply higher after an inflation report that saw both headline (1.7% from 2.2%) and core (3.2%) CPI fall faster than expected. Key to this was a decline in services inflation, which remains the sole driver of price pressures amid ongoing deflation for goods. Travellers will look kindly on the news that the main driver of disinflation came from transport (-2.2%), driven by lower air fares and motor fuels. Meanwhile, the impact of falling crude oil prices have been passed on to the consumer, with September petrol prices of 136.8p/litre standing well below the 153.6p/litre seen a year earlier. All-in-all this helped further the case that the Bank of England is behind the curve, with markets increasingly confident that we will see rates cut across the final two meetings of the year. The somewhat cautious approach to easing taken by the BoE may start to adjust from here, highlighting a case for a weaker pound after a period of relative strength.