Market Analysis

London's FTSE 100 gains as rate optimism is bolstered by a weaker CPI

Amos Simanungkalit · 14 Aug 20246.9K Views

On Wednesday, London stocks rose as UK consumer price inflation for July increased less than anticipated, bolstering expectations that the Bank of England might lower interest rates in its upcoming policy meeting.

The blue-chip FTSE 100 gained 0.5% by 0710 GMT, reaching a new two-week peak, while the mid-cap FTSE 250 index also advanced by 0.5%.

All sectors of the London market saw gains, except for industrial metal miners, which fell nearly 1% due to pressure on base metals following a larger-than-expected decline in Chinese lending that dampened sentiment.

UK consumer price inflation rose to 2.2% in July, up from two months at the BoE's 2% target. This was slightly below economists' expectations, and services inflation slowed considerably. Reuters’ poll had predicted a 2.3% rise in the annual headline CPI rate.

Neil Birrell, CIO at Premier Miton Investors, commented, "Year-on-year inflation was slightly higher last month, but this was anticipated due to previous energy price trends. The positive news is that it was below expectations, largely due to a more significant fall in services inflation in July. This offers hope that the BoE can continue to ease policy despite strong data from the job market."

The pound fell against the U.S. dollar, and money markets increased their bets on a BoE rate cut next month, now predicting a 47% chance of a 25-basis-point cut, up from 36% the previous day.

In stock news, Aviva rose by 0.3% after the British insurer reported a better-than-expected 14% increase in first-half operating profit, driven by higher general insurance premiums in Britain and Ireland.

Flutter soared around 13%, on track for its best day in eight months, as the world’s largest online betting company raised its full-year forecast following a significantly stronger-than-expected second quarter.