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UK bond yields drop at start of trading
The UK government bond market is open! And there is reassuring news for borrowers, and our political leaders.
UK bond prices are strengthening, a little, which is pushing down the yield (or rate of return) on these gilts.
10-year UK bond yields have dropped by over 4 basis points (0.04 of a percentage point) to 5.195%, away from the 18-year high set yesterday.
30-year bond yields are down 4bps too, to 5.831%.
Update: AJ Bell investment director Russ Mould reports there is âa measure of calm in government bond marketsâ today, as the oil price drops.
With Brent crude down about 0.5% at $95.20 a barrel, some of the fears of an inflationary shock that would drive interest rates higher may be easing.
Key events
Key components for UK’s first small nuclear reactor to be built in Newcastle
Siemens Energyâs Newcastle site has won an important contract in the energy world today â to make steam turbine components for Rolls-Royce SMRâs first three small modular reactors.
Those SMRs are being built on Anglesey in North Wales, and Siemens Energy is to become the first company to manufacture components â including high-pressure turbines and valve casings â for a small modular reactor anywhere in Europe.
Miatta Fahnbulleh, Secretary of State for Energy Security and Net Zero, says:
âThis is what our golden age of nuclear looks like in practice: skilled jobs in Newcastle, stronger British manufacturing and a more secure energy future.
Producing these components here in the UK will help strengthen our energy security, reduce our exposure to volatile international gas markets, create new export opportunities for British industry, and reindustrialise the UK.â
Back in April, Rolls-Royce secured up to £599m from Britainâs national wealth fund to help it in the race to develop the UKâs first small modular nuclear reactors at Wylfa, Anglesey.
Wall Street opened higher on relief that Federal Reserve policymaker Chris Waller isnât learning towards voting for a rate hike (see last post).
The Dow Jones industrial average has gained 363 points, or 0.7%, to 53,425 points, with the broader S&P 500 index up 0.5%.
Fed’s Waller indicates he will support holding rates steady at September meeting
Federal Reserve governor Christopher Waller has said today he is leaning toward keeping interest rates steady at the central bankâs September meeting, provided there are no surprises from upcoming inflation data.
In an interview with Reuters, Waller expressed confidence in the current inflation trends â just days after Fed chair Kevin Warsh argued that there could be âwork to doâ to tackle inflation.
Waller said:
Iâm going to paraphrase John Lennon here. Give disinflation a chance.
Iâm not going to say letâs wait until next year, but letâs just wait and see if we get some improvement on this.â
These comments seem to be pushing the dollar down, adding to the yenâs rise today â Japanâs currency has now gained almost 2% today.
Nvidiaâs acquisition of Hugging Face is another sign (see earlier post) that the companyâs ambitions extend far beyond selling chips.
Axel Rudolph, chief technical analyst at investing and trading platform IG, explains:
By bringing one of the key platforms for open-source and open-weight AI models into its ecosystem, Nvidia gains a much deeper relationship with developers and a new route into the software and deployment layers of AI.
The deal could help sustain demand for Nvidia hardware while reducing its reliance on a handful of hyperscalers, but there is a clear risk that Hugging Faceâs appeal as a neutral platform could be weakened if developers fear Nvidia is taking too much control. The price tag looks hefty on conventional measures, but Nvidia is clearly buying strategic influence as much as current earnings. And despite the scale of the deal, there still looks to be plenty of mileage left in the Nvidia share price: the company is expanding into more parts of the AI ecosystem, while its valuation does not look excessive when viewed against its longer-term growth prospects.â
New claims for unemployment support in the US have risen slightly.
There were 206,000 fresh âinitial claimsâ for jobless support last week, a rise of 2,000, new data from the US department of labor shows.
Nvidia to buy Hugging Face for $13bn
Newsflash: Nvidia has agreed to buy AI model platform Hugging Face for $13bn.
Hugging Face is a database of AI models, which recently hit the headlines after being hacked by a rogue group of OpenAIâs agents.
Announcing the deal, Nvidiaâs CEO Jensen Huang says Hugging Face is âa vibrant home for the open model developer communityâ.
Huang says that the deal will speed up the spread of open models, and pledges to help scale up Hugging Faceâs platform, strengthen its infrastructure and expand access to AI for developers and institutions.
Huang explains:
More than 18 million developers, researchers and creators use Hugging Face to share more than 3 million models, 500,000 datasets and 1 million applications. More than 200,000 companies use the platform to discover, evaluate, customize and deploy AI.
Hugging Face will remain an open platform for the entire AI ecosystem. Developers will choose the models they want, the frameworks they want, the clouds and inference service providers they want and the computing platforms they want. NVIDIA compute will not be required to build on or deploy through Hugging Face.
UK government bonds are continuing to rally, pushing down borrowing costs.
With prices rising, the yield on 10-year gilts is now down over 6 basis points (0.06 of a percentage point) to 5.176%. That wipes out all Wednesdayâs rise, and some of Tuesdayâs too.
Oil has shake off its earlier losses, and is pushing higher as traders fret about the Middle East conflict.
Israeli defense minister Israel Katz has warned that if Iran attacks Israel, the military will target all of the regimeâs infrastructure, âincluding energy infrastructure.â
Speaking at a Jewish New Year toast with Defense Ministry employees, Katz said:
âThere are signs we are seeing that indicate that the heavy economic pressure Iran is under and the fear of an uprising and the fall of the regime could push them to desperate measures.
âAn Iranian attack on Israel will free us from all constraints. We will strike all infrastructure â including energy infrastructure â and return Iran to the Stone Age and darkness,â he says.
Joe Maher, markets economist at Capital Economics, has predicted that UK government bonds will recover over the coming months, pushing down yields.
He told clients:
Higher energy prices alongside renewed fiscal concerns have pushed Gilt yields to multi-decade highs, but we continue to think they will fall back over the next year or so.
US layoffs slow despite AI
Over in the US, the pace of job cuts have slowed despite firms using AI to cut their workforces.
Coaching company Challenger, Gray & Christmas have calculated that US-based employers announced 33,429 job cuts in July, down 27% compared with June, and nearly half as many as in July 2025.
Itâs the lowest monthly total in two years.
Andy Challenger, workplace expert and chief revenue officer for Challenger, Gray & Christmas, explains:
âThe pace of layoffs fell dramatically this summer. Layoff plans continue to be announced primarily in Tech, and artificial intelligence is still the story, as investments in the technology reshape organizations.
âHiring has also increased over last year by 25%, so while AI is shifting the labor market, it is not dismantling it.
Butâ¦.
Technology companies announced 9,867 job cuts in July, taking the total so far this year up to 149,023.
Challenger says:
âTech remains the center of gravity for this yearâs cuts, and AI is still the reason companies give.â
Mark Sweney
Upmarket cinema chain Everyman saw revenues surge by a quarter and admissions rise by a fifth in the first half of the year, as blockbusters including the Michael Jackson music biopic and The Devil Wears Prada sequel saw box office sales top £600m in the UK & Ireland for the first time since before the pandemic.
Everyman, which is in the process of being taken private by its biggest shareholders after the business struggled last year, reported a 23.5% increase in revenues to £69.8m in the half year to 02 July.
Everyman, which has halted new site openings this year as the business refocuses under new chief executive Farah Golant, said that admissions rose 20.5% year-on-year to 2.6m.
The cinema-going recovery, fuelled by box office hits including the latest Super Mario movie, Ryan Goslingâs Project Hail Mary and Toy Story 5, helped Everyman bounce back to a £1.9m pre-tax profit. The company reported a £3.4m loss in the same period last year.
The strong performance meant that the company was able to reduce net debt to £17.4m, from £24.2m a year ago.
Everyman, which is opening three new venues next year, said that it increased its share of the UK market from 5.8% to 6.4% and that its membership programme increased 13.4% to 75,788.
âWe have momentum and strong focus to manage the business with discipline and prudent investment,â said Golant.
The company said that it expects its financial performance this year to be âmarginally aheadâ of 2025, with The Odyssey and Spider-man: Brand New Day proving to be summer blockbusters, and a strong slate to round out the year including the latest releases in the Hunger Games, Avengers and Dune franchises.
Yen rallies against the dollar
In another sign that market tensions are easing, the yen is rallying against the US dollar.
The Japanese currency has gained 1.4% so far today, to ¥156.5/$, adding to a 0.9% rally yesterday.
That taken the yen/$ exchange rate away from the 160 level that tends to make policymakers jumpy.
Last month, the yan rallied thanks to a joint intervention by Washington and Tokyo. This time, though, investors are attributing the move to increased expectations of a rate hike by the Bank of Japan.
Bank of Japan (BOJ) board member Hajime Takata can take the credit, after saying yesterday the central bank should conduct interest rate hikes nimbly to counter intensifying inflationary pressures, rather than sticking to the fixed semiannual pace anticipated by markets.
Interestingly, Japanâs top currency diplomat Atsushi Mimura has said that financial authorities remain on alert over currency market developments, adding:
âWe remain on a state of heightened alert.â
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