London close: Stocks rise on fresh rate cut hopes

London's equity markets finished higher on Wednesday as investors reacted positively to a significant drop in UK inflation, which reached its lowest point in over three years.

The FTSE 100 index rose 0.97%, closing at 8,329.07 points, while the FTSE 250 gained 0.89%, ending at 20,979.50 points.

In currency markets, sterling was last down 0.54% on the dollar to trade at $1.3003, as it lost 0.38% against the euro, changing hands at €1.1957.

“The FTSE 100 has been the standout winner of the day thanks to the pound’s losses in the wake of this morning’s surprise slowdown in inflation,” said IG chief market analyst Chris Beauchamp.

“No one quite expected UK consumers to be beneficiaries of such a move so soon, but it will at least provide some cheer ahead of what could be a gloomy Budget from the new government.”

Beauchamp noted that together with gold and silver miners, Wednesday’s big winners were anything “remotely connected” to the health of the UK consumer.

“Suddenly the outlook for UK plc seems much brighter, and it has certainly provided a jolt for the FTSE 100, which has otherwise been quite a dull market in recent weeks.”

UK inflation falls sharply, but house prices rise

In economic news, UK inflation fell sharply in September, reaching its lowest level in two and a half years, according to fresh data from the Office for National Statistics.

The annual consumer price index (CPI) dropped to 1.7%, down from 2.2% in August and below economists’ expectations of 1.9%.

It marked the first time inflation has fallen below 2% since April 2021.

The biggest decline came from transport prices, particularly airfares and motor fuels, which fell by 3.7%, while food and non-alcoholic beverages saw a slight 0.4% rise.

Core inflation, which excludes food and energy, also decreased significantly from 3.6% to 3.2%.

The inflation slowdown raised the possibility of more aggressive monetary easing by the Bank of England.

“British inflation’s downward trajectory, combined with slowing wages growth, emphasises Bank of England governor Andrew Bailey’s latest comments that the bank will get ‘more aggressive’ on its rate policy,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

In contrast, UK house prices saw a sharp rise in August, with annual growth accelerating to 2.8%, up from 1.8% in July, as market confidence grew following the first interest rate cut in four years.

According to the ONS, average house prices reached £293,000, with increases across all regions.

Scotland led with a 5.4% rise, followed by Wales at 3.5%, while prices in England increased by 2.3%.

Rent inflation remained elevated at 8.4% year-on-year, unchanged from August, with private rents averaging £1,336 in England.

“All eyes are now on the upcoming Budget," said Aaron Milburn, UK managing director at credit intelligence firm Pepper Advantage.

“On the supply side, buy-to-let mortgage holders - already struggling with higher rates - will be wary of potential increases in capital gains, while housebuilders will be watching for the greenlight to start building.

“Meanwhile, consumers are continuing to keep an eye on budgets after a challenging few years.”

Elsewhere, UK supermarket sales surged in September, driven by early Christmas shopping and Halloween purchases.

Industry data from NIQ showed total till sales rose by 4.7% in the four weeks ended 5 October, up from a 4% increase in the prior month.

General merchandise posted its first growth in 12 months, edging up by 0.2%, while fast-moving consumer goods saw a 1.4% rise in volumes.

“Even with higher disposable income for some households, shoppers still need a catalyst to spend,” said Mike Watkins, UK head of retailer and business insight at NIQ.

“Retailers will be looking to the traditional advertising campaigns in a couple of weeks’ time to really get shoppers into shopping mode, as a way to boost weekly sales in the final eight weeks of the golden quarter.

“Shoppers will look to spend more after the half-term holiday.”

Across the Atlantic, US mortgage demand plummeted, with applications falling by 17% in the week ended 11 October.

That marked the sharpest weekly decline since 2015, excluding the pandemic.

The drop, reported by the Mortgage Bankers Association, came as mortgage rates surged following strong jobs data and high inflation, pushing the yield on the benchmark 10-year Treasury note higher.

Whitbread climbs on increased dividend, insurers slide on fresh scrutiny

On London’s equity markets, Whitbread climbed 6.05% after the Premier Inn owner increased its half-year dividend by 7% and announced a £100m share buyback, despite a 22% drop in pre-tax profit to £309m on flat revenue of £1.5bn.

The company maintained its annual guidance.

In the mining sector, Antofagasta rose 1.28% after reiterating its full-year production guidance, reporting a 15% increase in third-quarter output.

Sector peers Anglo American and Fresnillo also saw gains of 1.64% and 2.22%, respectively.

Housebuilders rallied on improved economic data, with expectations of lower mortgage rates lifting demand prospects.

Taylor Wimpey and Barratt Redrow were up 3.47% and 4.66%, respectively.

Shares in Marshalls surged 10.3% after the company reported easing contraction in sales growth for the third quarter, with revenue down just 3%, compared to a 12% decline in the first half of the year.

The company also maintained its annual guidance.

XPS Pensions Group jumped 14.94% following a strong trading update, reporting a 23% increase in revenue for the six months ended 30 September.

The firm’s pensions actuarial consulting division drove growth, with a 17% rise in revenue due to strong demand and price adjustments.

Quilter advanced 4.66% after reporting record third-quarter net inflows of £1.5bn, driven by strong market performance and asset growth. Group assets under management rose 2% to £116.2bn.

On the downside, Ninety One fell 4.28% after reporting a slight decline in assets under management in the second quarter, down to £127.4bn from £128.6bn at the end of June.

Motor insurers Admiral Group, Aviva, and Direct Line declined following news of regulatory scrutiny.

The Financial Conduct Authority launched a market study into premium finance, while the government announced a task force to address rising car insurance costs.

Admiral dropped 2.23%, Aviva slipped 0.29%, and Direct Line lost 3.25%.

Mony Group tumbled 7.83% after reporting a 2% decline in third-quarter revenue, with weaker performance in its travel and home services segments offsetting growth in insurance and cashback divisions.

Revenue for the period stood at £112.9m.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 8,329.07 0.97%
FTSE 250 (MCX) 20,979.50 0.89%
techMARK (TASX) 4,775.16 0.37%

FTSE 100 - Risers

Whitbread (WTB) 3,258.00p 6.05%
Barratt Redrow (BTRW) 494.00p 4.66%
Entain (ENT) 712.00p 4.55%
Severn Trent (SVT) 2,740.00p 4.50%
Rolls-Royce Holdings (RR.) 560.00p 3.59%
Persimmon (PSN) 1,715.00p 3.49%
Taylor Wimpey (TW.) 165.70p 3.47%
Melrose Industries (MRO) 430.40p 3.35%
United Utilities Group (UU.) 1,106.00p 3.17%
Ashtead Group (AHT) 5,936.00p 3.13%

FTSE 100 - Fallers

Rentokil Initial (RTO) 341.10p -2.54%
Admiral Group (ADM) 2,714.00p -2.23%
Informa (INF) 809.20p -2.15%
Beazley (BEZ) 791.50p -1.31%
Sainsbury (J) (SBRY) 274.60p -0.94%
Mondi (MNDI) 1,390.00p -0.86%
Diploma (DPLM) 4,330.00p -0.73%
B&M European Value Retail S.A. (DI) (BME) 408.40p -0.66%
Intertek Group (ITRK) 5,080.00p -0.49%
Tesco (TSCO) 355.10p -0.42%

FTSE 250 - Risers

XPS Pensions Group (XPS) 354.00p 14.94%
Moonpig Group (MOON) 257.00p 12.47%
Marshalls (MSLH) 347.50p 12.46%
Tate & Lyle (TATE) 807.00p 8.32%
Indivior (INDV) 622.50p 6.41%
Hochschild Mining (HOC) 216.50p 5.31%
Oxford Instruments (OXIG) 2,040.00p 5.26%
Abrdn (ABDN) 167.45p 4.75%
Quilter (QLT) 148.20p 4.66%
CMC Markets (CMCX) 334.00p 4.54%

FTSE 250 - Fallers

Mony Group (MONY) 195.40p -7.83%
Ninety One (N91) 179.20p -4.02%
Direct Line Insurance Group (DLG) 176.20p -3.25%
Renishaw (RSW) 3,305.00p -2.79%
Raspberry PI Holdings (RPI) 355.10p -2.51%
Wizz Air Holdings (WIZZ) 1,226.00p -2.39%
Harbour Energy (HBR) 263.40p -2.34%
RS Group (RS1) 752.50p -2.27%
Ocado Group (OCDO) 361.50p -2.19%
Ruffer Investment Company Ltd Red PTG Pref Shares (RICA) 269.00p -2.00%