𝓤𝓷𝓲𝓽𝓮𝓭 𝓝𝓮𝔀𝓼

The FTSE 100 made strong headway on Wednesday, supported by a larger-than-expected cooling in inflation and a spike in the oil price.

The FTSE 100 index closed up 89.53 points, 0.9%, at 9,774.32. It had earlier traded as high as 9,853.13.

The FTSE 250 ended 123.78 points higher, 0.6%, at 22,164.76, and the AIM All-Share ended up 2.07 points, 0.3%, at 751.48.

The soft UK inflation data sealed the Bank of England’s (BoE) expected interest rate cut on Thursday and increased the likelihood of further reductions in 2026, analysts said.

Barclays said it “removes the final hurdle that could likely have, in our view, dissuaded the BoE from cutting bank rate tomorrow”.

The headline Consumer Prices Index (CPI) rose 3.2% year-on-year in November, slowing from 3.6% in October, and well below FXStreet-cited consensus of 3.5%, according to data published by the Office for National Statistics.

On a monthly basis, CPI fell by 0.2%, compared with a 0.1% increase a year earlier.

November’s figure was below the 3.4% forecast in the recent BoE Monetary Policy Report. Similarly, core CPI inflation, which excludes energy, food, alcohol and tobacco, slowed to 3.2% from 3.4% against expectations for it to remain unchanged.

In addition, closely watched CPI services inflation cooled to 4.4% from 4.5% in October, compared with forecasts for it to remain unchanged. CPI goods inflation slowed to 2.1% from 2.6%.

“UK price pressures are rapidly easing amid persistent softness in demand growth. We expect headline inflation to fall towards the BoE’s 2% target over the course of next year,” said Peel Hunt chief economist Kallum Pickering.

Mr Pickering thinks the risk now is that the BoE has “fallen behind the curve and may need to play catch-up in 2026”.

“We will be paying careful attention to the voting pattern and forward guidance which accompany tomorrow’s BoE decision for a signal that the bank is ready to lean harder against downside risks,” he explained.

“Do not be surprised if the BoE sends dovish signals that it stands ready to lean against downside risks next year – implying cuts at successive meetings.”

The BoE is forecast to reduce the bank rate to 3.75% from 4.0% on Thursday, after voting for the status quo at meetings in September and November.

Mr Pickering said that, following the inflation surprise, money market bets for a BoE cut on Thursday jumped to 97% from 92%, while expectations for the total number of cuts over the next year increased to 2.7 from 2.4.

Money markets now put a 65% chance on a cut in the first quarter of 2026, up from 45% prior to Wednesday’s data, he noted.

The pound was quoted lower at 1.3359 dollars at the time of the London equities close on Wednesday, compared with 1.3429 dollars on Tuesday.

Rate-sensitive housebuilders were in vogue, with Barratt Redrow up 3.7% and Persimmon up 2.3%.

A rebound in the oil price also provided support in London, with Shell up 1.4% and BP up 0.7%.

Brent oil was quoted at 59.91 dollars a barrel at the time of the London equities close on Wednesday, up from 59.01 dollars late Tuesday.

Kathleen Brooks, at XTB, said the reversal in prices came after US President Donald Trump announced a “total and complete blockade of all sanctioned oil tankers” going in and out of Venezuela.

“This is an unusual move, typically blockades need to be agreed by Congress, so this is a serious escalation of events. Venezuela holds the world’s largest share of oil reserves, hence why this blockade has caused ructions in the energy market,” Ms Brooks pointed out.

In Europe on Wednesday, the CAC 40 in Paris closed down 0.3%, while the DAX 40 in Frankfurt ended 0.5% lower.

The euro stood at 1.1749 dollars, down against 1.1775 dollars. Against the yen, the dollar was trading higher at 155.55 yen compared with 154.79 yen.

Stocks in New York were lower at the time of the London equity close on Wednesday.

The Dow Jones Industrial Average was down 0.2%, the S&P 500 index was 0.7% lower, while the Nasdaq Composite declined 1.1%.

The yield on the US 10-year Treasury was quoted at 4.17% flat from Tuesday. The yield on the US 30-year Treasury was at 4.83%, also unchanged from Tuesday.

Back in London, insurer Phoenix Group rose 3.3% after UBS upgraded it to ‘buy’ from ‘neutral’, while an upgrade from Berenberg supported miner Glencore, which rose 1.5%.

Bunzl fell 2.0% after backing its 2025 guidance but cautioned that its operating margin is expected to be slightly down in the coming year.

In response, JPMorgan analyst Jane Sparrow lowered 2026 earnings per share forecasts by 4% and revenue estimates by 1%, with the bulk of the EPS downgrade being margin-driven, reflecting continued operating expenditure inflation but without price inflation to offset.

On the FTSE 250, Serco climbed 7.4% after upgrading guidance for underlying operating profit for this year, citing growth in the defence sector.

The Hampshire-based government services outsourcing provider said it now expects 2025 underlying operating profit of around £270 million, up 3.8% from previous guidance of £260 million but 1.5% lower than £274 million in 2024.

“We believe Serco is well positioned, with rising defence budgets, attractive fundamentals, and strong balance sheet optionality,” analysts at Peel Hunt said.

But Ceres Power’s woes continued, down a further 6.1%, after last week’s critical note from Grizzly Research.

Hunting was knocked down 4.6% as Jefferies downgraded to ‘hold’ from ‘buy’.

Gold was quoted at 4,326.25 dollars an ounce on Wednesday, higher against 4,304.60 dollars.

The biggest risers on the FTSE 100 were Barratt Redrow, up 13.30 pence at 375.00p, Phoenix Group, up 23.00p at 719.00p, Convatec, up 7.40p at 242.20p, HSBC Holdings, up 30.00p at 1,141.80p and United Utilities, up 30.00p at 1,203.00p.

The biggest fallers on the FTSE 100 were DCC, down 181.00p at 4,924.00p, Bunzl, down 44.00p at 2,176.00p, ICG, down 32.00p at 2,024.00p, Weir, down 44.00p at 2,814.00p and IMI, down 34.00p at 2,434.00p.

Thursday’s economic calendar has interest rate decisions in the UK, Europe, Norway and Sweden, plus US inflation data.

Thursday’s UK corporate calendar has half-year results from electricals retailer Currys.

– Contributed by Alliance News