London’s FTSE 100, which only registered a more underwhelming gain compared to continental peers after a US inflation slowdown on Tuesday, was back in form on Wednesday after similarly favourable data from the UK.
Retail and property led the way, as an easing of inflation pressure in the UK has lifted hopes that the Bank of England has enacted its last rate hike and will not need to keep bank rates as high for as long.
There was some bullish data out of China for investors in mining heavyweights to cheer also.
The FTSE 100 index was up 71.66 points, 1.0%, at 7,512.13. The FTSE 250 was up 245.40 points, 1.3%, at 18,781.53, and the AIM All-Share was up 6.88 points, 1.0%, at 716.60.
The Cboe UK 100 was up 0.8% at 749.71, the Cboe UK 250 was up 1.5% at 16,298.00, and the Cboe Small Companies was up 0.3% at 13,235.66.
In European equities, the CAC 40 in Paris was up 0.6%, while the DAX 40 in Frankfurt was up 0.5%.
UK consumer price inflation cooled dramatically last month, undershooting the Bank of England’s forecasts, and sealing a victory for Prime Minister Rishi Sunak in his goal to halve inflation by the end of the year.
The Office for National Statistics said UK consumer prices rose 4.6% annually in October, dropping sharply from the 6.7% pace in September. The reading was lower than the market consensus of 4.8%, as cited by FXStreet, which was also the forecast from the Bank of England.
The annual rate was the lowest since October 2021, the ONS noted.
The data has helped to reinforce the market’s expectation that UK interest rates have peaked, and driven expectations that cuts could be sooner than previously thought.
AJ Bell analyst Russ Mould commented: ‘With confidence there will be no rate increases before the end of the year the market is now looking ahead to the prospect of rate cuts. Whether falls in inflation will stall and whether the Bank of England is as keen as Rishi Sunak to declare mission accomplished in the fight against rising prices remains to seen. What will encourage observers in Threadneedle Street is the fall in services inflation – further falls in this area could be the precursor to a pivot towards bringing rates down.
‘For now, investors are in the mood to celebrate and the prospects of a big ’Santa rally’ are building as we head towards December.’
In London’s FTSE 100, stocks in interest-rate sensitive sectors got a boost. Retailers rose as an easing of inflation means less of a squeeze on consumer pockets. JD Sports rose 2.3%, and Primark-owner AB Foods added 1.2%.
Housebuilder Taylor Wimpey and property portal Rightmove both rose 1.7%. London-listed property firms had also surged on Tuesday in the wake of a similarly favourable US inflation reading.
This put downward pressure on the dollar, however, with investors believing the Federal Reserve has already enacted its final interest rate hike for this cycle of monetary policy tightening.
Pressure on the dollar continued on Wednesday, though the cooler UK inflation data, which took some sting out of BoE interest rate expectations, meant the pound did not top the $1.25 mark for too long. It breached that level for the first time since mid-September on Tuesday.
Sterling was quoted at $1.2465 at midday on Wednesday, lower than $1.2475 at the London equities close on Tuesday. The euro traded at $1.0862, up from $1.0855. Against the yen, the dollar was quoted at JP¥150.40, down versus JP¥150.85.
The US retail sector comes into focus later. There is a US retail sales print at 1330 GMT, at the same time as producer price index data.
Stocks in New York were called higher. The Dow Jones Industrial Average was called up 0.3%, the S&P 500 index up 0.4%, and the Nasdaq Composite up 0.5%.
Back in London, Experian jumped 7.1%.
The data analytics and consumer credit reporting firm said pretax profit in the six months to September rose 48% year-on-year to $763 million from $517 million, on revenue that rose around 5% to $3.42 billion from $3.25 billion.
It soothed some investor concern after numbers from peers TransUnion and Equifax underwhelmed last month.
SSE rose 2.1%, after the energy firm said it swung to a pretax profit of £573.3 million in the six months that ended September 30 from a loss of £511.0 million a year prior.
Revenue fell 15% to £4.79 billion from £5.63 billion. Cost of sales came in 46% lower at £3.29 billion compared to £6.13 billion, more than offsetting a rise in operating costs, which more than doubled to £847.9 million from £396.0 million.
Also on the up, miners Anglo American and Glencore rose 4.9% and 4.1% on the back of positive data out of China, a big buyer of minerals.
Chinese retail sales grew by more than expected, boosted by an extended holiday at the start of the month. Retail sales jumped 7.6% on-year in October, according to the National Bureau of Statistics, up from September’s 5.5% and the highest growth since May. It was ahead of the market consensus of 7.0%, as cited by FXStreet.
Meanwhile, industrial production growth in October crept up to 4.6%, beating forecasts that it would mean unchanged from September’s 4.5%.
Among London-listed mid-caps, Genuit rose 11%, after it said it expects to achieve full-year adjusted operating profit ‘marginally above’ market expectations of £89.7 million.
The provider of water, climate and ventilation systems for buildings and infrastructure said performance was supported by the diversity of its market segment exposure, with revenue in the first 10 months of the year falling 4.8% to £504.2 million on a like-for-like basis from the year before.
Elsewhere, Ocean Wilsons rose 13%.
Its maritime services subsidiary in Brazil saw year-to-date third-quarter net revenue climb to $356.4 million, which is 8.3% higher than the prior year, while profit rose 33% to $58.5 million.
On AIM, Verici DX surged 62%, after the developer of clinical diagnostics for organ transplants signed an exclusive global licensing agreement with Thermo Fisher to further develop an assay for pre-transplant prognostic testing for the risk of early kidney rejection.
Verici DX said it expects around $5 million in payments from Thermo Fisher over the next 12 months, with a further payment thereafter, alongside ongoing royalties on tests sold.
Gold was quoted at $1,973.01 an ounce at midday on Wednesday, higher than $1,964.57 on Tuesday. Brent oil was trading at $82.01 a barrel at midday on Wednesday, down from $83.42 on Tuesday.
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