London close: Stocks rise as UK inflation slows further

London's stock markets saw a notable upswing on Wednesday, driven by encouraging data revealing a greater-than-anticipated slowdown in UK inflation for November.

The development heightened expectations of potential interest rate cuts in the coming year.

By the close, the FTSE 100 had gained 1.02%, settling at 7,715.68 points, while the FTSE 250 jumped 1.62% to reach 19,629.09.

In currency markets, sterling was last down 0.6% on the dollar, trading at $1.2656, while it recorded a slight dip of 0.38% against the euro to change hands at €1.1551.

"The ghost of inflation has been transformed into Father Christmas for UK investors today," said IG chief market analyst Chris Beauchamp.

"The drop in UK CPI delivered a timely Christmas present for the FTSE 100, taking it back to 7,700 and making it the strong performer of the day.

"While pound sterling bulls won't like to see the drop in price inflation, for investors in UK plc there is hope that next year will bring more good news, in the form of rate cuts that can give the FTSE 100 a further boost."

UK inflation eases more than expected in November

In economic news, figures from the Office for National Statistics showed that UK inflation eased more than expected in November.

Consumer price inflation dipped to 3.9%, down from October's 4.6%, marking the lowest level since September 2021 and falling below analysts' predictions of 4.4%, raising expectations of potential interest rate cuts for the upcoming year.

The decrease was primarily attributed to declines in transport, recreation, culture, and food and non-alcoholic beverages prices.

Core inflation, which excludes volatile food and energy costs, also fell from 5.7% in October to 5.1% in November, contrary to economists' forecasts of 5.6%.

"Inflation eased again to its lowest annual rate for over two years, but prices remain substantially above what they were before the invasion of Ukraine," said ONS chief economist Grant Fitzner.

"The biggest driver for this month's fall was a decrease in fuel prices after an increase at the same time last year."

Fitzner said food prices also pulled down inflation, as they rose much more slowly than at the same time last year.

"There was also a price drop for a range of household goods and the cost of second-hand cars."

Meanwhile, the annual rate of decline in UK house prices reached a 12-year low in October.

According to the ONS, average house prices in the UK were £288,000 in October, down £3,000 compared to October 2022.

The 1.2% year-on-year drop was worse than September's revised 0.6% decrease and the lowest since October 2011.

England saw a 1.4% decline in average prices, Wales dropped by 3%, but Scotland experienced a 0.2% increase.

House price inflation in the UK has been slowing since July 2022, when it reached 13.8% year-on-year, and it turned negative for the first time in over a decade this September.

Economist Gabriella Dickens from Pantheon Macroeconomics said that the "leg-down" in official house prices in October "likely won't be the last", with Nationwide statistics pointing to further drops in November.

Dickens noted that the official ONS data was "based on completed sales, financed with mortgages that were arranged a few months beforehand" and reckoned prices had further to fall despite already being 1.4% below their seasonally adjusted peak in November 2022.

"Note, too, that first estimates of the official index have ultimately been revised down by 1% on average since January 2020, as further transaction data are received from the Land Registry.

"And large revisions are even more likely than usual now, as the proportion of transactions informing the first estimate dropped to just 19% in October, about half the normal level.

"All told, we still expect a 5% peak-to-trough fall, with the nadir coming in the first quarter of 2024."

In the eurozone, construction output faced a setback in October, mainly erasing the previous month's growth.

Eurostat reported a 1.0% month-on-month drop in production, following a revised 0.9% gain in September.

Across the Atlantic, consumer confidence in the US rose in December, according to the Conference Board.

The consumer confidence index increased to 110.7 this month, up from November's revised 101.0 reading.

However, market consensus had anticipated a figure closer to 104.5.

Finally on data, China's central bank maintained benchmark lending rates as expected earlier in the global day.

The one-year loan prime rate (LPR) remained at 3.45%, while the five-year rate, which influences mortgage rates, held steady at 4.20%.

Petrofac surges, oil plays in focus as sterling weakens

On London's equity markets, Intertek Group surged by 3.61% following a double upgrade to 'outperform' by Exane.

The research firm expressed optimism about Intertek's mid-term earnings per share growth, foreseeing a 20% upside potential from a re-rating.

Mike Ashley's Frasers Group retail empire managed gains of 0.97% after announcing the acquisition of luxury clothing site Matchesfashion from Apax Partners for £52m in cash.

Pharmaceutical firm Indivior rose 2.88% after it settled a patent dispute with Teva Pharmaceuticals subsidiary Actavis.

Energy services provider Petrofac rocketed 45.08% after it secured its second contract award under a $14bn multi-year framework agreement with Tennet.

Petrofac's portion was valued at $1.4bn.

Ocado Group enjoyed a 3.03% increase in its stock price, while Flutter Entertainment continued its strong performance for the second consecutive day, with a gain of 2.84%.

On Tuesday, Flutter received an 'upgrade to buy' rating from Peel Hunt.

The energy sector was also in focus as the pound weakened against the dollar, with BP, Shell, Tullow Oil, Energean, and John Wood Group all recording gains.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,715.68 1.02%
FTSE 250 (MCX) 19,629.09 1.62%
techMARK (TASX) 4,285.36 1.42%

FTSE 100 - Risers

Intertek Group (ITRK) 4,249.00p 3.66%
SEGRO (SGRO) 907.80p 3.23%
IMI (IMI) 1,700.00p 2.91%
Ocado Group (OCDO) 789.00p 2.90%
Barclays (BARC) 151.64p 2.70%
Marks & Spencer Group (MKS) 271.40p 2.61%
Beazley (BEZ) 539.00p 2.47%
Kingfisher (KGF) 247.60p 2.44%
B&M European Value Retail S.A. (DI) (BME) 575.00p 2.42%
Land Securities Group (LAND) 725.20p 2.40%

FTSE 100 - Fallers

NATWEST GROUP (NWG) 218.00p -0.46%
Rightmove (RMV) 563.80p -0.21%
Endeavour Mining (EDV) 1,814.00p -0.17%
Dechra Pharmaceuticals (DPH) 3,840.00p -0.10%
Intermediate Capital Group (ICP) 1,693.00p -0.09%
Associated British Foods (ABF) 2,377.00p -0.08%
Rio Tinto (RIO) 5,783.00p -0.05%
Reckitt Benckiser Group (RKT) 5,430.00p -0.04%
Sage Group (SGE) 1,174.00p 0.17%
Smith (DS) (SMDS) 311.60p 0.19%

FTSE 250 - Risers

Future (FUTR) 742.00p 6.00%
Great Portland Estates (GPE) 432.00p 5.73%
Energean (ENOG) 1,037.00p 5.39%
Tyman (TYMN) 317.50p 5.31%
HGCapital Trust (HGT) 448.50p 4.55%
Primary Health Properties (PHP) 106.30p 4.22%
Bank of Georgia Group (BGEO) 3,835.00p 4.21%
Wood Group (John) (WG.) 170.60p 4.09%
BBGI Global Infrastructure S.A. NPV (DI) (BBGI) 139.20p 4.04%
Foresight Group Holdings Limited NPV (FSG) 416.00p 4.00%

FTSE 250 - Fallers

Diversified Energy Company (DEC) 1,082.50p -3.52%
W.A.G Payment Solutions (WPS) 85.00p -3.41%
North Atlantic Smaller Companies Inv Trust (NAS) 3,910.00p -1.76%
Me Group International (MEGP) 126.00p -1.72%
Clarkson (CKN) 3,160.00p -0.94%
Watches of Switzerland Group (WOSG) 706.00p -0.49%
PPHE Hotel Group Ltd (PPH) 1,145.00p -0.43%
Foresight Solar Fund Limited (FSFL) 97.30p -0.41%
Asia Dragon Trust (DGN) 343.00p -0.29%
BH Macro Ltd. GBP Shares (BHMG) 364.50p -0.27%