Stock markets managed to end the week roughly flat, despite the announcement of dreadful inflation data in the US that threatened to derail the current, month-long bounce. There was little to be positive about in the data: US inflation leapt to 9.1% in June from 8.6% in the previous month, far surpassing most expectations. Fuel and food did most of the damage but, excluding these more-volatile components, the so-called “core” rate of inflation also beat expectations as rent and second-hand car prices accelerated again. The only silver lining was that core inflation continued to fall from its peak in March.

Predictably, stock markets fell on the news, as fears grew that the US central bank would have to raise rates by a full percentage point at its next meeting. These fears were promptly quashed publicly by two Federal Reserve governors, however, and the markets could then recover. Even more helpfully, an influential survey of inflation expectations in America, one that has been referred to by the Federal Reserve in its decision-making, showed that longer-term inflation expectations were declining. The week ended on a sour note, however, as Apple, the world’s second-largest company by market value, was reported to be slowing down its expansion plans. This prompted a sudden, 2% slide in the technology-heavy Nasdaq Composite index.

It was harder-going in Europe, where the resignation of the Italian Prime Minister prompted a minor collapse in Italian assets to their lows of the year. Expectations were also rife that the Nord Stream pipeline, which transports Russian natural gas to Germany and was recently closed by the Russians for “repairs”, would probably not re-open next week as scheduled. Those expectations were cemented when the pipeline’s operator, Gazprom, invoked force majeure clauses in its contracts with European buyers in respect of delivery shortages. Continental Europeans were told to expect their energy usage to be rationed. Nevertheless, European markets managed to end the week up, suggesting that a never-say-die attitude may be forming among investors.

Markets continue to be buffeted by fears of inflation and recession on a daily basis, but at least this week they showed that they can shrug off some seriously bad news. The hope for investors is that sufficiently dismal expectations have now been priced in by markets, and that a base may be forming which could support asset prices despite the inevitable bad news stories that are yet to come. Crucial to this hope is the current round of earnings reports for the second calendar quarter and, specifically, whether they will force analysts to raise or lower their expectations for future profits. On present form, investors could probably stomach some bad news on profits, but it is difficult for a company’s stock price to rise when a profits warning is being issued.