Slower inflation provides ‘welcome’ boost to London markets
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London’s equity markets and the pound both rebounded as traders and investors welcomed lower-than-expected inflation data. The Office for National Statistics said the rate of Consumer Prices Index (CPI) inflation slowed to 2.5% in December, from 2.6% in November.
The slower-than-expected eased some pressure on Chancellor Rachel Reeves as bond yields eased back slightly due to hopes for further interest rate cuts. It also proved a boon for the UK’s main stock indexes, with the FTSE 100 and FTSE 250 both bouncing back after striking their lowest levels this month in the previous session.
The FTSE 100 finished 99.59 points, or 1.21%, higher to end the day at 8,301.13. Sterling jolted higher despite the inflation data pointing towards more interest rate cuts, as traders concerns over stagflation eased slightly, but lost ground later in the session.
The pound was up 0.06% at 1.222 US dollars and up 0.3% at 1.187 euros when London’s markets closed. Chris Beauchamp, chief market analyst at IG, said: “Slowing annual UK inflation and a fall in US core CPI (consumer price index) have given stocks the space to rally on Wednesday afternoon.
“Today’s UK inflation data was also good news for hard-pressed FTSE stocks, and there was plenty of interest in the FTSE 250 and its UK-focused names. “After the unrelenting parade of bad news on the UK economy, today’s figures are a welcome change.”.
