Time to recap.

Stock markets have rallied again amid signs that America’s inflation surge may have peaked, with the White House piling pressure on the Opec cartel to get its oil pumps working faster.

In London, the FTSE 100 index closed at an 18-month high, while the smaller FTSE 250 index hit a fresh record peak again. Defence and aerospace Meggitt led the charge, up 16% at a record high itself, after it found itself in a takeover tug-of-war between two US firms.

European markets also saw new peaks, as did Wall Street, as the pandemic stock market rally remained on track.

Time to recap.

Stock markets have rallied again amid signs that America’s inflation surge may have peaked, with the White House piling pressure on the Opec cartel to get its oil pumps working faster.

In London, the FTSE 100 index closed at an 18-month high, while the smaller FTSE 250 index hit a fresh record peak again. Defence and aerospace Meggitt led the charge, up 16% at a record high itself, after it found itself in a takeover tug-of-war between two US firms.

The rally came after the latest US inflation data raised hopes that the surge in consumer prices could be fading. The CPI index rose by 0.5% in July, down on June’s 0.9%, with core inflation also slowing.

Prices for used cars and trucks, which have jumped almost 42% in the last year, rose just 0.2 per cent between June and July.

The headline annual rate of inflation remained at a 13-year high of 5.4%, with gasoline, food and shelter costs all continuing to rise.

But core inflation eased, up just 0.3% on the month -- although it was still 4.3% up on the year.

The data has calmed some nerves that the US central bank might tighten monetary policy too soon.

Neil Birrell, Premier Miton Chief Investment Officer and manager of Premier Miton Diversified Growth Fund, says:

“The investing world was looking at the US CPI data for a lead on likely Fed policy and market direction but it came out bang in line with expectations at the headline level.

The focus will be on re-opening sensitive sectors to give a feel for how much of the upward pressure is transitory. For now, though, prices continue to rise, driven largely by supply constraints. Overall, however, inflation climbed at a more moderate pace, which will give the Fed’s current view some support.”

The White House urged Opec+ to pump more oil - throwing aside concerns that burning fossil fuels was contributing to the climate emergency.

Jake Sullivan, Joe Biden’s national security adviser, warned that high oil prices “risk harming the ongoing global recovery”.

In a broadside at Opec, and allies including Russia, Sullivan said the group’s plans to slowly raised production to pre-Covid levels were too slow.

At a critical moment in the global recovery, this is simply not enough,”

The White House’s move shows the ‘delicacy of the current situation’, says Danni Hewson of AJ Bell:

Gas prices have been climbing as people have jumped back in their cars and when you look at pressure points for July it’s right up there. And while a big chunk of the inflation basket hikes have come from expected avenues like airfares, hotels and used car sales, keeping a lid on household costs will be vital going forward.

As will keeping a lid on CO2 emissions....

In the UK, Heathrow Airport reported its busiest month since March 2020 - but also warned that barriers such as the US ban on UK travellers, and expensive Covid tests were hitting the recovery.

Online takeaway delivery firm Deliveroo has doubled the number of orders from customers to 149m in the first six months of the year as the appetite for takeaways continued to grow despite the reopening of bars and restaurants.

Winchester has the unwelcome distinction of becoming the UK’s most unaffordable city to buy a house in:

The competition watchdog has sided with Great Britain’s energy regulator after an industry rebellion over a clampdown on the returns energy network companies can make at the expense of customer bills.

The boom in demand for online shopping has prompted John Lewis to open a one million square foot warehouse in Milton Keynes, creating 500 jobs.

And lamb grazed on the delightful Gower penisula in Wales has become the first UK food to receive protection under the post-Brexit regime.

Goodnight. GW

The UK-focused FTSE 250 index of medium-sized companies has closed at a new record high - with Meggitt leading the way.

The domestically focused FTSE 250 has closed nearly 185 points higher at over 23,756 points, up 0.8% today.

That’s a fresh record peak, extending the index’s recent strong rally since the pandemic crash almost 18 months ago, lifted by economic optimism and a string of takeover offers for UK firms.

Meggitt was the top riser, closing 16% higher at 830p after it revealed Transdigm has proposed a 900p-per-share takeover, trumping the 800p offer from Parker Hannifin.

The blue-chip FTSE 100 index also had a strong day, finishing at its highest level in 18 months. It gained 59 points or 0.8% to 7,220 points, the highest since February 2020.

Engineering group Spirax-Sarco finished as the top FTSE 100 riser (+4.2%), followed by insurer Admiral (+3.9%).

Michael Hewson of CMC Markets explains:

Amongst the outperformers has been Spirax-Sarco Engineering who have seen a decent jump in H1 revenues to £643.7m due to increased demand for its steam products. An increase in operating margins to 23.9% has helped drive a 41% increase in profits before tax to £150m.

Admiral shares moved higher after the insurer saw a 76% rise in group profits before tax to £482.2m in the first half of the year, raising its interim dividend by 63% to 115p per share. Profits were boosted by the sale of its Penguin Portals business, which included Confused.com, as well as lower claims payouts.

Cybersecurity firm Avast (+3%), also pushed the FTSE 100 higher after its takeover by NortonLifeLock was agreed (which the Telegraph reports puts up to 1,000 jobs at risk).

Other markets also rallied, with Europe’s Stoxx 600 also hitting a fresh record high - alongside Wall Street’s new peak. Investors are showing confidence in the recovery, and seem calmer about the risks of inflation.

Back in the UK, the takeover of defence and aerospace technology firm Meggitt has taken a twist.

US firm Transdigm Group is trying to gatecrash Meggitt’s agreed takeover by American firm Parker-Hannifin, by proposing to pay 900p per share for the Coventry-based firm.

Meggitt, a defence supplier to the UK government and provider of components for US F-35 Lightning II fighter jets, says it received this preliminary, non-binding proposal of a possible cash offer from Transdigm yesterday.

Meggitt is currently reviewing the unsolicited proposal, and will consider both the financial terms and the potential impact of Transdigm’s offer on its employees, pension schemes and customers, as well as HM Government and other regulatory bodies.

Shares in Meggitt have soared by over 16% to 833p on the FTSE 250 index.

Parker’s offer, at 800p per share, included a series of commitments to the UK government, including honouring contracts, ensuring most of the company’s board are UK nationals; and increasing R&D spending by a fifth over the next five years.

But the UK government is taking an “active interest” in Parker’s takeover, amid concerns over its impact on British jobs and investment - and the loss of a US defense company to an overseas owner.

Meggitt add that there is no certainty that any firm offer will be made by TransDigm nor as to the terms on which any offer might be made.

They are still recommending Parker’s offer:

The directors of Meggitt continue to recommend unanimously the offer by Parker to Meggitt shareholders announced on 2 August 2021 and intend to include that recommendation in the Scheme Document expected to be sent to Meggitt shareholders in the week commencing 16 August 2021.

The Board of Meggitt believes Parker’s offer continues to represent an attractive proposition for Meggitt’s shareholders and for its broader stakeholders, including its employees, pension schemes and customers, together with HM Government, for the long-term.

The US stock market has opened at a new record high, as investors welcome signs that inflation across America may have peaked.

Although the headline annual inflation rate remained at a 13-year high of 5.4%, investors are relieved that core inflation eased (up 0.3% m/m), and that monthly price pressures moderated (with CPI up 0.5% during July, from 0.9% in June).

It may take some pressure off the US Federal Reserve to start tapering its bond-buying stimulus programme.

The Dow Jones industrial average has jumped by 203 points, or 0.6%, to 35,467 in early trading on Wall Street.

Most of the 30 stocks on the Dow are higher, led by retail chains Home Depot (+1.7%) and Walmart (+1.5%), construction equipment maker Caterpillar (+1.6%) and aircraft maker Boeing (+1.2%).

The broader S&P 500 has also hit a new record high, up 11.3 points or 0.25% at 4,448.

Guy Foster, chief strategist at wealth manager Brewin Dolphin, says “the worst is over” for inflation, which is good news for stocks.

“This is the validation stocks were look for that the extraordinary levels of inflation in recent months were anomalous and driven by outliers. It should be well received.”

Here’s his take on July’s CPI report:

• “Inflation finally descended back into the realm of normality during July.
• “The July numbers had far fewer outliers than the last three months’ reports.
• “Hotels rooms continue to skew the figures upwards. Dental services also saw high price inflation.
• “Inflation remains a challenge and it will take some time for the numbers to revert to more normal levels. However, the annual rate of inflation will slow fairly sharply next year as the high figures from recent months drop out of the numbers.

Housing costs continued to rise last month, putting more pressure on households.

Shelter, a vital component of the inflation basket, was up 0.4% in July, and accounted for over half of the monthly increase in core inflation.

Shelter costs (rent, or the equivalent that owner-occupiers would pay) were 2.8% higher year-on-year, showing underlying inflation pressures.

Ambrose Crofton, global market strategist at J.P. Morgan Asset Management, explains:

“There are signs that some of the inflation related to supply-chain bottlenecks and the reopening of the economy is easing. Used cars which had increased 10.5% in June only rose 0.2% in July, while airline fares actually fell 0.1% in the month. With 60% of the annual inflation figure coming from just a fifth of the inflation basket including restaurants, energy, used cars and transport – this lends credence to the argument that much of the pickup in prices will prove temporary.

“However, while a good amount of inflation can be attributed to these temporary factors, there are signs that underlying price pressures that could prove more persistent continue to build. The shelter component that tends to move in long cycles and accounts for a third of the inflation basket rose to 2.8% year on year.

“Overall, today’s inflation print is the latest in a string of strong economic releases that should raise the pressure on the Federal Reserve to announce the tapering of its asset purchases sooner rather than later.

Economists are encouraged that US inflation rate dipped on a monthly basis last month, to 0.5% from June’s red-hot 0.9%.

Greg Daco of Oxford Economics tweets that America’s economy is now passed peak inflation, even though annual inflation was the highest since August 2008.

The Washington Post’s Heather Long points out that prices cooled in several notable areas - including used cars (up just 0.2% in July, after a 10.5% surge in June).

The annual rate of US inflation remained at a 13-year high last month, with gasoline prices one factor pushing up the cost of living.

The US Consumer Prices Index rose by 0.5% in July, down from June’s 0.9%, the U.S. Bureau of Labor Statistics reports, as supply chain problems and strong demand as the economy reopens continues to push up the cost of living.

Gas prices were up 2.4% during the month - highlighting why the White House is urging Opec to pump more.

On an annual basis, CPI was 5.4% higher year-on-year in July, matching the 13-year high set in June as inflationary pressures hit the US economy.

Core inflation, which strips out volatile food and energy components, did ease a little. It fell to 0.3% per month, from 0.9% in June. It was up 4.3% year-on-year, from 4.5% a month ago.

The BLS reports that the cost of shelter, food, energy, and new vehicles all increased during July, although auto insurance and airline fares have dipped.

The food index increased 0.7 percent in July as five of the major grocery store food group indexes rose, and the food away from home index increased 0.8 percent.

The energy index rose 1.6 percent in July, as the gasoline index increased 2.4 percent and other energy component indexes also rose.

The index for all items less food and energy rose 0.3 percent in July after increasing 0.9 percent in June. Along with shelter and new vehicles, the indexes for recreation, for medical care, and for personal care increased in July.

The index for used cars also increased in July, but the 0.2-percent advance was much smaller than in recent months. The index for motor vehicle insurance declined in July, and the index for airline fares fell slightly.

The US government is calling on the Opec group, and their allies, to boost oil production amid worries that rising energy prices are weighing on the recovery.

National Security Adviser Jake Sullivan said the Organization of the Petroleum Exporting Countries should to move faster to restore global supply of petroleum to pre-pandemic levels, to combat rising fuel prices.

In a statement, Sullivan warned:

“Higher gasoline costs, if left unchecked, risk harming the ongoing global recovery,”

Sullivan points out that crude oil prices have risen above their pre-pandemic levels, in a call for “reliable and stable global energy markets”.

The news has knocked the oil price lower -- US crude is down 1.35% at $67.37 per barrel, while Brent crude is down 1.2% at $69.75.

The Opec group, and allies including Russia, slashed production by millions of barrels per day early in the pandemic, as demand and prices slumped.

They have been gradually relaxing those curbs, adding an extra 400,000 barrels per day each month from August.

Sullivan says they must act faster to bring production back to pre-pandemic levels.

“At a critical moment in the global recovery, this is simply not enough.”

Sullivan adds that the Biden administration is pressuring OPEC and producers allied with the cartel, both in public and in private, to more swiftly undo the production cuts put in place at the start of the pandemic, adding:

Competitive energy markets will ensure reliable and stable energy supplies, and Opec+ must do more to support the recovery.”

The competition watchdog has sided with Great Britain’s energy regulator after an industry rebellion over a clampdown on the returns energy network companies can make at the expense of customer bills.

The Competition and Markets Authority (CMA) received multiple appeals from energy companies, including National Grid and Scottish Power, earlier this year after Ofgem set out plans to limit their returns on investing in the UK’s gas pipes and electrical cables.

Jonathan Brearley, Ofgem’s chief executive, said the regulator was “fully focused on keeping bills as low as possible for customers” while supporting the investment needed to create a green energy system, and the CMA’s ruling was “an important step forward towards this goal”.

Here’s the full story:

Deliveroo doubled the number of orders from customers to 149m in the first six months of the year as the appetite for takeaways continued to grow despite the reopening of bars and restaurants.

The food delivery platform revealed a 110% increase in orders across the UK and Ireland compared with the first half of 2020, and announced it now offers takeaways from more UK restaurants and food merchants than any other service.

The company has been on a restaurant recruitment drive, signing up 10,000 new sites in recent months, increasing the base by almost 30%.

Deliveroo said it was also continuing to grow its network of on-demand grocery delivery options because of a “strong conviction” that the Covid-19 pandemic has accelerated the shift in consumer behaviour towards buying food online.

Demand for food delivery services from Deliveroo and rivals including Uber Eats and Just Eat Takeaway boomed during the coronavirus pandemic, when lockdown restrictions closed cafes and restaurants for large periods of time.

Deliveroo’s consumer base reached an average of 7.8 million monthly active consumers in the second quarter of 2021, a more than twofold increase from 3.7 million in the first quarter of 2020.

Will Shu, the founder and chief executive of Deliveroo, said consumer behaviour “may moderate later in the year” but the company remained “excited about the opportunity ahead”.

Shares in Deliveroo have dropped 4.5% to 347p this morning. Yesterday they hit 379p, after German rival Delivery Hero took at 5% stake. That was their highest level since Deliveroo’s stock market flotation this spring (at 390p).

Shu has told Reuters that he has not held any talks with Niklas Oestberg, his counterpart at Delivery Hero, since the move, adding:

“I think his view was: the stock’s undervalued, I’m gonna start buying, and I know the space super well.

This is in my view just a financial investment.”

Cybersecurity company Avast are the top riser on the FTSE 100, up 3.3%, after the Prague-based firm agreed to be taken over by US rival NortonLifeLock last night.

The cash and share deal values Avast, which has more than 435m monthly active users, at up to $8.6bn (£6.22bn).

It will create a new consumer Cyber Safety business, at a time when cyber crime such as ransomware and spyware are a growing threat as the pandemic leads to more remote working and e-commerce.

Ondřej Vlček, chief executive officer of Avast, says:

At a time when global cyber threats are growing, yet cyber safety penetration remains very low, together with NortonLifeLock, we will be able to accelerate our shared vision of providing holistic cyber protection for consumers around the globe.

But.. the deal will also take one of London’s few major tech companies off the market.

And when NortonLifeLock’s interest emerged last month, my colleague Nils Pratley flagged that City analysts reckoned £6bn was about £1bn short of fair value for Avast....

Avast also released financial results this morning, which confirm that business has been strong. Operating profits rose 68% in the first half of the year to £226.7m, with organic revenue growth up over 10% compared with H1 2020.

In the City, the FTSE 100 index has hit its highest level in eight weeks this morning.

The blue-chip stock index is has gained 28 points to 7189, up 0.4% today.

That’s the Footsie’s highest intraday level since mid-June, when it hit its highest levels since the pandemic crash of February/March 2020.

The news that the US Senate passed president Biden’s infrastructure package yesterday is giving markets a lift, says Naeem Aslam of Avatrade:

There is a lot of optimism among investors and traders as the Senate passed the highly anticipated infrastructure bill worth $1 trillion.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

The UK’s travel recovery has begun, according to Heathrow Airport, which has reported its busiest month since the pandemic began -- despite ‘barriers to travel’ remaining.

More than 1.5 million passengers passed through its terminals in July -- 75% more than a year earlier, following the easing of travel restrictions.

But.. that’s still over 80% down on July 2019 -- when 7.75 million customers travelled through Heathrow in a typically busy pre-pandemic summer month.

Heathrow says the “long road to recovery” has started:

The relaxation in rules has provided a much-needed boost to the UK travel industry, and enabled people across Britain to look forward to a more normal summer reuniting with family and friends abroad.

North American passenger numbers grew by nearly 230% year-on-year, with New York’s JFK airport reclaiming its top spot as Heathrow’s most popular route.

And after a very tough pandemic, the UK’s largest airport warns that it faces a ‘long road to recovery’ -- pointing to the cost of Covid-19 tests, and the effective ban on UK passengers visiting the US.

Since the start of August, fully vaccinated travellers from US and EU have been allowed to visit England without having to isolate. And Heathrow is urging the United States to follow suit, and lift its restrictions on fully-vaccinated travellers from the UK.

With fully vaccinated US visitors now able to travel to the UK without the need to quarantine, the joint UK/US travel taskforce must capitalise on the UK’s world-leading vaccine rollout and reach a reciprocal agreement for fully vaccinated UK travellers.

The airport is also pushing the government to cut the cost of Covid-19 tests -- saying that other European countries have slashed their prices, or are subsiding them.

Heathrow argues that cheaper lateral flow tests should be used for low-risk destinations -- to avoid travel becoming the preserve for the wealthy.

Heathrow chief operating officer, Emma Gilthorpe, says:

“Finally, some blue skies are on the horizon, as travel and trade routes slowly reopen. The job though is far from complete. Government must now capitalise on the vaccine dividend and seize the opportunity to replace expensive PCR tests with more affordable lateral flow tests.

This will ensure travel remains attainable for hardworking Brits, desperate for well-earned getaways and keen to reunite with loved ones before the summer travel window closes.”

The UK’s competition watchdog is also examining the issue of Covid-19 test fees, following concerns about the vastly different prices being charged for them.

My colleague Sarah Butler explained on Sunday that:

Similar tests for day 2 and 8 after return to England listed on the government’s website can cost more than £300 or as little as £20. On average, prices in the UK are £75, compared with about £40 in France and Greece.

Health secretary Sajid Javid wrote to the Competition and Markets Authority last Friday asking the body to help stamp out “exploitative behaviour” and “unfair practices” among the 400-plus firms which offer the tests and he said the government was determined to take action.

Also coming up today

The future of UK inhaler firm Vectura hangs in the balance, after private equity bidder Carlyle stepped back from a bidding war with tobacco firm Philip Morris International.

PMI now has until 5pm Thursday to improve its (already higher) offer, while Vectura’s board must now decide which bid to back.

In a statement to the City this morning, Vectura’s board says they will “make a further announcement” once that deadline has expired, or sooner if PMI declares its offer is final.

The markets are also bracing for the latest US inflation data, which will show whether prices kept pushing higher last month. The US CPI is expected to dip to 5.3% year-on-year, from a 13-year high of 5.4% in June.

The agenda

• 9am BST: China’s money supply and loan data for July
• 9.30am BST: UK manufacturers’ sales by product: 2020, released by the Office for National Statistics
• Noon BST: US weekly mortgage approvals.
• 1.30pm BST: US inflation data for July