US rate hike expectations fade as inflation and consumer spending fall - business live

US rate rises in doubt as inflation slides to 1.6% and retail sales drop 0.2% in weaker than expected US figures

• Pound rises above $1.30 on weak US data
• John Lewis: 'lipstick effect' takes hold as consumer caution grows
• Eurozone trade booms in May

3.15pm BST

Before closing up, let's take a look at the markets.

Wall Street is up in early trading, as weaker data appeared to dampen the chances of further rate rises this year:

2.51pm BST

Before we take a look at Wall Street, the Guardian's Helena Smith brings us this report on Cyprus:

2.32pm BST

Falling food and petrol prices contributed to the drop in the annual rate of US inflation, to 1.6% in June from 1.9% in May.

The Labor Department figures showed that core inflation - stripping out food and energy - was unchanged at 1.7% in June.

With its dual mandate, the Fed needs to take into account the decline in the unemployment rate this year as well as the drop back in core inflation. For that reason, we still expect the Fed to continue raising interest rates in the second half of this year.

Nevertheless, the odds of a September rate hike are fading.

2.02pm BST

James Knightley, chief international economist at ING, says the weak inflation and retail sales figures will make the Fed waver even more when considering its next policy move.

US inflation and retail sales came in on the softer side of expectations, reinforcing the view in the market's mind that the Fed won't carry through with the four rate hikes they are currently forecasting before end 2018.

The market is pricing in just one and a half hikes. We still look for three - one more this year along with a formal start to balance sheet reduction with two more hikes in 2018.

1.55pm BST

The dollar is down against the yen and the euro (as well as the pound).

The US currency is at a near two-week low of 112.33 yen, down 0.8% after the weak inflation and retail sales figures.

1.38pm BST

The dollar's loss from the weak US data is the pound's gain...

The pound is up 0.5% at $1.2996, within touching distance of that $1.30 mark.

1.35pm BST

US consumer price inflation has fallen more sharply than expected, to 1.6% in June from 1.9% in May.

Consumer spending was also weaker than expected, with a surprise 0.2% fall in retail sales in June, versus expectations of a 0.1% rise.

12.39pm BST

Craig Erlam, analyst at currency trader Oanda, says markets are subdued ahead of the US inflation and retail sales data, due at 13.30, as investors wait for clues on the next move from the Fed.

It's been a sluggish start to trading on Friday as traders await inflation and consumer spending numbers from the US that could add a further dovish layer to Janet Yellen's comments on Wednesday.

It's become very clear in recent weeks that an increasing number of Federal Reserve policymakers are becoming concerned about persistent subdued inflation despite evidence suggesting that the labour market is tightening, typically a trigger for stronger wage growth and higher prices.

12.21pm BST

The pound is up against both the dollar and the euro.

It hit an 11-day high against the dollar, at $1.2984, up 0.3%.

12.17pm BST

JP Morgan Chase has kicked off the US banks reporting season for the second quarter with better than expected results.

The biggest US bank by assets reported a 13.4% increase in quarterly profits, as gains from higher interest rates offset a drop in bond trading.

We continued to post very solid results against a stable-to- improving global economic backdrop. The US consumer remains healthy, evidenced in our strong underlying performance in consumer and community banking. Loans and deposits continue to grow strongly, and card sales and merchant processing volumes were up double digits.

We are also pleased to announce increases to our capital return plans while continuing to invest in our businesses for long-term profitability - reflecting the financial strength of our company and the significant capital and liquidity improvements we have made over the past several years.

11.49am BST

Roughly 1.5m new cars were sold in Europe in June, 2.1% more than the same month last year and the highest number since June 2007, just before the global crisis struck a blow to the industry.

11.10am BST

Eurozone trade was in good shape in May, with the goods surplus rising to a21.4bn from a17.9bn in April.

The single currency bloc exported a189.6bn of goods in May, a 12.9% increase on the same month last year.

The widening of the euro-zone's trade surplus in May adds to signs that GDP growth may have accelerated in the second quarter. And in contrast to the situation last year, we expect net trade to boost euro-zone GDP growth in the quarters ahead.

10.36am BST

Analysts at TS Lombard said Chinese leaders will be hoping to settle differences at this weekend's National Financial Work Conference:

This year's meeting has attracted particular attention after Xi Jinping is said to have demanded better regulatory coordination following the July 2015 stock market correction and large-scale capital outflows in H2/15. There had been discussion of moving the meeting up to summer 2016 - half a year ahead of schedule. In the end, however, the meeting, which should have been held in January, has ended up being delayed by disagreements about how to approach regulation.

These disagreements have centred around a potential restructuring of the regulatory system.

10.26am BST

The sale of government shares in bailed out bank Royal Bank of Scotland was "value for money" despite losses for the taxpayer of nearly 2bn.

That's the verdict of the public spending watchdog, the National Audit Office, which has published a report on the controversial sale of a 5.4% two years ago.

The sale came under heavy criticism at the time after the Government offloaded its first tranche of shares in RBS at a 52-week low.

There was also speculation over leaked information after shares plunged 8% in the three days before the sale as hedge funds bet against RBS.

Related: RBS to pay $5.5bn penalty over US loan misselling scandal

9.43am BST

John Lewis says consumers are increasingly unwilling to spend money on big ticket items as confidence wanes and incomes are squeezed by higher prices and weak wage growth.

It's the more considered categories, the arguably deferrable spend, that we're seeing most affected by the uncertainty in the macro conditions - so those big ticket categories are currently trading just behind last year.

"We believe [spontaneous categories such as beauty] to be significantly ahead of the market. Perhaps it's the lipstick effect as we might have called it back in the recession [of 2008]."

I would have preferred to start my first year as managing director of John Lewis in slightly more benign conditions. The backdrop is very uncertain and it was made worse by the tragic events that happened across British cities over the last few months.

Consumers feel uncertain and worried about what the circumstances will mean for their future financial prosperity.

9.05am BST

Some respite for Carillion this morning with shares up 4.6% at 60p, making the building group the top riser on the FTSE 250.

After heavy losses every day this week, shares have been boosted by the news that the troubled company has appointed HSBC as its joint financial adviser and joint corporate broker.

Related: Carillion has 'no future without rights issue of at least 500m'

8.37am BST

European markets are steady in early trading, with only small moves.

8.26am BST

China's leaders gather every five years to discuss ways to improve the financial system of the world's second largest economy.

The next meeting of the National Financial Work Conference takes place today and tomorrow in Beijing and President Xi Jinping is expected to attend.

The meeting has held a special place in China's economic and political calendar since it was introduced to encourage more sustainable economic growth following the Asian financial crisis.

The first conference in 1997 saw the establishment of an insurance regulator and a plan to bail out China's largest banks. The second led to the creation of a banking regulator and a drive to list major state-owned lenders on overseas stock exchanges.

7.54am BST

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

European markets are expected to follow Wall Street higher this morning as investors continue to digest the more cautious tone from Fed chair Janet Yellen.

The Dow Jones posted another record close, while the US dollar remained under pressure as markets adjusted to how the next moves on monetary policy might play out.

The prospect that further interest rate rises may well be much more gradual, if they happen at all, shouldn't have been entirely unexpected given the risks involved in trying to withdraw stimulus and raise rates at the same time, nonetheless judging by the market reaction it appears to have gone down fairly well.

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