London shares leap upwards after lower-than-expected inflation reading

Shares in the City leapt upwards on Wednesday as traders celebrated a lower-than-expected inflation reading in the morning.

The pre-Christmas bounce saw only eight companies trading in the red on the FTSE 100, while retailers such as Marks & Spencer, Ocado and Kingfisher crowded towards the top of the index.

NatWest bucked the trend among its rivals, becoming the only FTSE 100 bank to lose value on Wednesday, while Barclays was in the top five best performers on the day.

The FTSE 100 rose 77.65 points, or 1.02% to end the day at 7715.68.

CPI inflation fell to its lowest point in more than two years in November, new figures from the Office for National Statistics showed in the morning.

Prices rose 3.9% in the year to November, down from 4.6% in October and significantly below the 4.3% that had been forecast by taking an average of several economists’ predictions.

As the year draws close to the end, the jump on Wednesday made it look more likely that the FTSE could end 2023 slightly higher than it started the year. As markets closed on Wednesday afternoon the index was just a little over 2% higher in the year to date.

“The ghost of inflation has been transformed into Father Christmas for UK investors today,” said Chris Beauchamp, chief market analyst at online trading platform IG.

“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 GBP 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.”

At the end of the day in Europe, Frankfurt’s Dax index fell 0.07%, while the Cac 40 in Paris had closed up 0.12%.

In New York a little while after markets had closed in Europe, the S&P 500 had gained 0.07%, while the Dow Jones was 0.04% higher.

On currency markets the pound was trading 0.53% lower against the dollar at 1.2666 and had dropped 0.26% against the euro at 1.1556.

There was little major news from London-listed companies on Wednesday. Frasers Group revealed that it had bought luxury brand Matches Fashion for around £52 million. Shares closed up 1%.

Shares in LGB Media performed less well as the LadBible owner revealed that profit from its Australia business declined. Shares fell by 5.3% on the news.

Tortilla Mexican Grill saw an even bigger drop, down 9.5%, because it told shareholders that sales would grow slower than expected. Revenue will rise nearly 14% in 2023, the brand said, but that was below previous forecasts.

The biggest risers on the FTSE 100 were Intertek, up 150p to 4,249p, Segro, up 28.4p to 907.8p, IMI, up 48p to 1,700p, Ocado, up 22.2p to 789p, and Barclays, up 3.98p to 151.64p.

The biggest fallers on the FTSE 100 were NatWest Group, down 1p to 218p, Rightmove, down 1.2p to 563.8p, Endeavour Mining, down 3p to 1,814p, Dechra Pharmaceuticals, down 4p to 3,840p, and Intermediate Capital, down 1.5p to 1,693p.