London midday: Stocks maintain gains after inflation data

dl city of london square mile financial district lse london stock exchange trading finance black cab taxi generic pexels — Sharecast / Humphrey Muleba via Pexels

London stocks were still firmly in the black by midday on Wednesday as a bigger-than-expected drop in UK inflation fuelled hopes of interest rate cuts.

The FTSE 100 was up 0.9% at 7,507.74.

Russ Mould, investment director at AJ Bell, said: "The FTSE 100 maintained the head of steam it had built up on Tuesday afternoon as UK inflation followed yesterday’s US reading and came in below expectations.

"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."

Encouraging data out of China was also helping to underpin the mood, after retail sales and industrial production numbers came in ahead of expectations.

On home shores, figures from the Office for National Statistics showed that inflation fell to a two-year low in October as energy prices eased after the energy price cap was cut.

The annual rate of consumer price inflation declined to 4.6% from 6.7% in September, beating economists’ expectations for a fall to 4.8%.

The largest downward contribution to the monthly change in inflation came from housing and household services, the ONS said, where the annual rate for CPI was the lowest since records began in January 1950.

The figures showed that gas costs fell by 31%, versus a 1.7% increase in September. Meanwhile, electricity costs were down 15.6% in October compared with a 6.7% rise the month before.

ONS chief economist Grant Fitzner said: "Inflation fell substantially on the month as last year’s steep rise in energy costs has been followed by a small reduction in the energy price cap this year.

"Food prices were little changed on the month, after rising this time last year, while hotel prices fell, both helping to push inflation to its lowest rate for two years."

On a monthly basis, CPI was unchanged in October, compared with a rise of 2.0% last year.

In equity markets, Experian surged as it delivered a solid set of first-half results with all regions contributing positively to growth, as and reiterated its guidance for the full year.

SSE was also trading up as its half-year earnings came in above expectations.

Genuit surged after the manufacturer of plastic piping systems said full-year adjusted operating profit was set to be "marginally" above market expectations of £89.7m.

Housebuilders were among the best performers as the drop in inflation boosted hopes of interest rate cuts. Taylor Wimpey, Barratt Developments, Persimmon, Crest Nicholson and Berkeley all rose sharply.

Market Movers

FTSE 100 (UKX) 7,507.74 0.90%
FTSE 250 (MCX) 18,767.35 1.25%
techMARK (TASX) 4,116.57 0.75%

FTSE 100 - Risers

Experian (EXPN) 2,862.00p 6.75%
St James's Place (STJ) 697.60p 5.60%
Anglo American (AAL) 2,235.00p 4.27%
Glencore (GLEN) 467.55p 3.90%
International Consolidated Airlines Group SA (CDI) (IAG) 159.10p 3.38%
Spirax-Sarco Engineering (SPX) 9,104.00p 3.13%
Hargreaves Lansdown (HL.) 765.40p 3.04%
Smurfit Kappa Group (CDI) (SKG) 2,878.00p 3.01%
Fresnillo (FRES) 550.80p 2.95%
Endeavour Mining (EDV) 1,708.00p 2.83%