US interest rate cut in September is looking increasingly likely: Richard Hunter

The PCE rose 0.1 per cent month on month, annualising to 2.5 per cent, both in line with estimates. The non-farms payroll figure on Friday will be the next set of important data, with 185,000 jobs expected to have been added in July, compared to 206,000 the previous month.

The reporting season continues apace this week, with updates from the likes of McDonald’s, Boeing, PayPal, Chevron and Exxon Mobil.

Arguably of more significance will be updates from four more members of the “Magnificent Seven” – Microsoft, Meta Platforms, Amazon and Apple – who will be wishing to avoid the bath given to Tesla and Alphabet last week after disappointing numbers set against a high bar of expectations.

In the meantime, evidence remains of an ongoing move into smaller cap stocks in anticipation of a first interest rate cut, with the Russell 2000 index having had a strong run over recent weeks. While slightly off their highs, the main indices have nonetheless put in a convincing performance so far this year, with the Dow Jones ahead by 7.7 per cent, the S&P500 by 14.4 per cent and the Nasdaq by 15.6 per cent.

Asian markets also rallied, with investors also looking forward to a busy week which will include the Bank of Japan’s monetary policy meeting as well as an expected announcement from China, which provides the teasing prospect of further stimulus from the authorities against a backdrop of announced measures which have so far failed to whet the appetite of overseas investors.

This week in the UK the pace is equally frenetic, with the earnings season at full throttle. Updates from BP and Shell will be among the highlights, in addition to releases from the likes of Diageo, Next, International Consolidated Airlines and Rolls-Royce.

For the banks, HSBC, Standard Chartered and Barclays will round off the season, hoping to repeat the strong lead given so far from Lloyds Banking and NatWest, where creditable half-year performances were boosted by a strong second quarter.

There will also be some focus on the Bank of England, which will reveal its latest interest rate decision on Thursday. At present, the consensus is evenly split between a cut and a no-change decision, with the latest economic data having seemingly been unbale to provide a definitive steer. A cut at some point this year is nevertheless expected, although the timing remains on the flip of a coin.

In early exchanges, the premier index grabbed the bullish baton from overseas, with a broad mark up which included some buying interest in stocks which have struggled most recently such as Prudential and BP. Pearson provided a headwind, however, as it posted lower half-year pre-tax profits although maintaining full-year guidance, with the shares dropping by more than 4 per cent, while Reckitt Benckiser was under strong pressure after a busy week including the announcement of the sale of some of its higher profile but non-core brands, while some litigation concerns also persist.

Richard Hunter is head of markets for interactive investor