Consumer stocks rally drives UK's FTSE 100 to record close

(Reuters) -Britain's FTSE 100 clinched a fresh record close on Wednesday with consumer-related stocks leading the gains, while investors digested an inflation report that diminished hopes for a near-term Bank of England rate cut.

The blue-chip index FTSE 100 closed 1% higher, breaching the intraday record levels it touched on Friday.

Meanwhile, the more domestically focused FTSE midcap index posted a modest rise of 0.2%.

Both the benchmark indexes erased earlier losses made in the session.

Official data revealed the UK's consumer price inflation hit its highest in 18 months in July when it increased to 3.8% in the fastest annual rise for a Group of Seven economy and approaching the BoE's forecast of a 4% peak in September.

The data further tempered the already low expectations of a rate cut by the British central bank, with traders now betting on a quarter-point reduction in March next year. Earlier this month, markets had anticipated a cut before the end of 2025.

The inflation report's interest rate implications led to a 0.2% dip in homebuilders on concerns about mortgage affordability.

The aerospace and defence index came under pressure for a second consecutive day, falling 1.7% after marking its largest single-day decline since early April on Tuesday.

Consumer stocks drove the gains on the FTSE 100, with Unilever, Reckitt and Tesco rising between 1.2% and 3.2%.

The healthcare sector was up 1.8%.

Financials added to the advances, with banks and non-life insurers advancing 1.4% and 1.7%, respectively.

Utilities saw a 1.9% increase, with water provider United Utilities gaining 3.5% after Barclays upgraded its stock rating to "Overweight" from "Equal Weight."

Among individual movers, Ithaca Energy jumped 10.4% to the highest in nearly three years after the oil and gas company lifted its 2025 production forecast.

Medical equipment maker Convatec rose 5.6% and posted its best day since March this year, after it announced $300 million share buyback programme.

(Reporting by Ragini Mathur in Bengaluru; Editing by Leroy Leo and Ros Russell)