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UK’s FTSE 100 touches near 7-month high as BoE rate cut bets gain traction
Global Banking & Finance Review®
Company
By Shashwat Chauhan
(Reuters) -British equities jumped on Wednesday as investors cheered a surprise drop in domestic inflation, which spurred hopes that the Bank of England (BoE) could consider interest rate cuts early next year.
The blue-chip FTSE 100 advanced 0.9% as of 0902 GMT, touching its highest level since May. 24 earlier in the session, outpacing the pan-European STOXX 600, which was trading flat. [.EU]
The pound dropped 0.5% after official data showed British inflation fell by more than any economist polled by Reuters predicted in November, pushing the headline rate to its lowest since September 2021.
“Let’s not be churlish, the latest UK inflation numbers deliver a welcome shot in the arm for the UK economy,” said Danni Hewson, head of financial analysis at AJ Bell.
Hewson added that the inflation figures would “give markets faith that interest rates will follow the trajectory they’ve already bought into.”
The annual rate of increase in the consumer prices index dropped to 3.9% from 4.6% in October.
Investors moved to price in two quarter-point rate cuts by the BoE for the first half of next year, with the first potentially coming as soon as March.
The domestically-inclined FTSE 250 midcap index also added 0.9%, hitting an over seven-month high.
Rate-sensitive real estate, real estate investment trusts and homebuilders advanced between 0.8% and 1.1%.
Heavyweight energy stocks added 1.6%, boosted by higher crude oil prices, while banks jumped 1.2%.
Most major FTSE 350 sectors rallied, with travel and leisure and life insurers amongst top gainers, rising more than 1% each.
Yields on UK government bonds also fell, with the yield on the benchmark 10-year gilt last at 3.549%.
Among individual stocks, Intertek Group jumped 3.1% after Exane BNP Paribas upgraded the product testing company’s rating to “outperform” from “underperform”.
Petrofac soared over 40% after the oilfield services provider secured a $1.4 billion contract.
(Reporting by Shashwat Chauhan in Bengaluru; Editing by Eileen Soreng and Janane Venkatraman)
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is typically measured by the Consumer Price Index (CPI).
The Bank of England is the central bank of the United Kingdom, responsible for issuing currency, managing monetary policy, and ensuring financial stability.
The FTSE 100 is a stock market index that represents the 100 largest companies listed on the London Stock Exchange, based on market capitalization.
Interest rates are the amount charged by lenders to borrowers for the use of money, expressed as a percentage of the principal. They influence economic activity and inflation.
A rate cut refers to a reduction in the interest rate set by a central bank, aimed at stimulating economic growth by making borrowing cheaper.
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