Slower inflation provides ‘welcome’ boost to London markets

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.”

Stateside, US markets also rallied due to inflation, as a lower-than-expected core CPI reading of 3.2% aided market sentiment.

Across the Channel, the other key European markets followed suit, making strong progress in the afternoon due to positivity on Wall Street.

The Cac 40 ended 0.94% higher for the day and the Dax index was up 1.7%.

In company news, Currys was among London’s strong performers after the technology retailer hiked its full-year profit outlook after robust festive trading.

It came despite bosses at Currys warning they will cut back on hiring as it faces an extra £32 million in wage costs after the autumn Budget.

Shares in the business were up 10.7% at 90.8p at the close.

Housebuilder Vistry was another notable climber after it said it remained on track with its most recent trading guidance.

Shares rose by 15.7% to 595.5p despite the firm highlighting slumping profits, as the steadier performance provided an improvement after recent downgrades.

Asos had a positive session after the fast fashion retailer revealed plans to close its US warehouse in Georgia as part of an ongoing turnaround.

Shareholders welcomed further cost-cutting efforts, as it seeks to bounce back from recent significant losses.

Asos shares finished up 6.5% at 405p on Wednesday.

Meanwhile, the price of oil swung back towards a six-month high amid hopes of a continued recovery in energy demand.

A barrel of Brent crude oil was up by 1.88% to 81.42 dollars (£66.68) as markets were closing in London.

The biggest risers on the FTSE 100 were Lloyds, up 3.5p to 57.12p, Barclays, up 17.15p to 280.95p, St James’s Place, up 51.5p to 880.5p, Diploma, up 216p to 4,298p, and Howden Joinery, up 38.5p to 774.5p.

The biggest fallers on the FTSE 100 were Endeavour Mining, down 26p to 1,487p, Anglo American, down 24p to 2,448p, Reckitt, down 42p to 4,821p, Imperial Brands, down 15p to 2,580p, and Melrose Industries, down 3p to 556.8p.