London’s flagship index jumped on Wednesday after UK CPI inflation fell to 2.5% in December from 2.6% in the month prior, and investors celebrated the potential impact on interest rates.

Even though inflation is still well above the 2% base rate, the simple fact that inflation halted its ascent sent a wave of optimism through UK assets after a gloomy start to the year.

UK stocks rose, bond yields fell, and the pound showed signs of stabilisation.

The FTSE 100 surged 0.7% higher, led by UK and interest rate-sensitive sectors, including housebuilders and utility companies. Even the banks joined the rally.

“A surprise pullback in the rate of inflation has given joy to investors,” said Russ Mould, investment director at AJ Bell.

“It strengthens the argument for the Bank of England to continue cutting interest rates and that’s fired up shares in housebuilders in the hope that mortgage rates will go down and more people will be able to afford to get onto the housing ladder. Banking shares jumped on the prospect of more demand in the mortgage market.

“The inflation reading has also helped to lower bond yields, with the 10-year gilt easing back a little to 4.841%, which will be welcomed with open arms by the under-fire chancellor, Rachel Reeves. However, the prospect of higher costs for companies this year still threatens to drive up inflation if they decide to raise prices, which means people’s living standards won’t suddenly improve because of today’s inflation reading.”

Although many problems still persist for the UK economy, there was little ill feeling in UK equities on Wednesday.

Barratt Redow, Taylor Wimpey and Persimmon jumped around 3%, while Howden Joinery added 3.6% in the hope lower inflation would spur building activity.

Lloyds was 3.5% as investors chose to focus on the financial health of Lloyds customer base instead of how interest rates could impact key profitability and income margins.

Diploma was the top riser, up 3.6%, after reporting organic revenue growth of 7% and maintaining full-year guidance.

There were few losers on Wednesday. Precious metals miners felt the pressure off improving sentiment while a broker downgrade hit Anglo American.

Tekcapital portfolio company Guident has announced the appointment of a US investment bank to conduct a private placement for the autonomous vehicle technology company ahead of a potential NASDAQ IPO later this year.

The investment bank will conduct both the private placement and the IPO raise.

“We are very pleased to have appointed an investment banker,” said Harald Braun, Executive Chairman of Guident.

“The AV industry is rapidly developing, and we believe that teleoperations is critical for the safe roll out of vehicles and robots. The adoption of autonomous vehicles globally is accelerating, and Guident welcomes the accompanying regulatory developments that put the safety of passengers and the public at the forefront of autonomous vehicle rollouts.”

Teleoperations are crucial to meeting many US states’ safety requirements, which stipulate autonomous vehicles must be able to be remotely controlled by a human operator in the case of any mishaps.

Meeting these requirements is a prerequisite to the roll-out of autonomous vehicles in states including California, Florida, Michigan, Arizona, Nevada, and Louisiana.

Tekcapital is yet to provide any insight into Guident’s potential valuation on a successful NASDAQ listing. However, the AV sector is attracting billions in investment, with investors prepared to provide funding at rich valuations to secure a piece of exciting early-stage AV companies.

WeRide’s initial public offering, combined with a concurrent private placement, generated $458.5 million in proceeds. Meanwhile, Waymo LLC has completed its largest funding round to date, securing $5.6 billion from investors. Pony.ai raised $260m at a valuation of over $5bn.

The weight of evidence from recent transactions and the revenue multiples investors committed their cash at suggests Guident could prove to be the jewel in Tekcapital’s crown with a valuation potentially many times Tekcapital’s current market cap.

Vistry shares rose on Wednesday after the house builder said they were on track to meet recently reduced profit guidance, providing hope that the worst of the cost miscalculation saga is behind them. 

Stripping out the impact of provisions for underestimating the costs at a number of their sites, Vistry had a fairly reasonable year. Completions are set to rise 7% to 17,200, and revenues are projected to increase 9% to £4.4bn.

However, the problems with Vistry haven’t been the sales; it’s been with the management of costs that investors will still have reservations about despite the upbeat assessment of sales and completion activities.

“After delivering three consecutive profit downgrades in the three months prior, Vistry has finally broken its streak of bad news. The trading update wraps up a truly disastrous 2024 for the group, where despite new home completions and revenue rising, profits have been on a downward spiral,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.

“That’s largely down to the group’s strategy shift to a Partnerships-only model, where it teams up with local authorities and housing associations.”

“These partners foot most of the bill, freeing up Vistry to deploy its cash on more projects. That’s seen the group chase faster-than-average growth, but a series of managerial missteps and accounting issues that have led to profit downgrades have raised serious questions about the new structure and internal controls.”

The FTSE 100 made small gains on Tuesday as UK bond market volatility decreased and upbeat corporate earnings trumped negative ones, helping drive stocks higher.

London’s leading index was 0.1% at the time of writing as housebuilders rose and offset losses in BP and JD Sports. It wouldn’t be a surprise if gains turned to losses in the afternoon, with the bid ebbing as the session progressed.

“The FTSE 100 held firm despite headwinds from BP warning of lower production and weak refining markets and Reinet Investments selling an approximate 2% stake in cigarette-to-vaping group British American Tobacco,” said Russ Mould, investment director at AJ Bell.

“The warning from BP sours the recent recovery in its share price after a prolonged weak spell. Concern about the global economy puts a cloud over oil demand this year and BP’s latest update continues its bad run for news, having suffered impairments and warned of weak refining margins last year.

“Investors often think BP and its peers are well-oiled machines, pumping out oil and gas with ease and doling out endless dividends and share buybacks. In reality, they operate in a high-risk environment with unpredictable earnings.”

BP shares slipped 2.4%.

Persimmon was the top riser after announcing a 7% increase in completions and rising average sales prices. Investors were evidently pleased that the strong performance led the board to guide profit before tax at the top end of the range for the full year as shares rose by over 5%.

“Persimmon’s 2024 trading round-up showed it’s sitting on solid ground, despite the group having faced its fair share of struggles in recent years,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.

“From their peak, both volumes and operating margins have fallen much harder than the broader sector. But Persimmon looks to have turned a corner. New home completions and average selling prices both exceeded market expectations, up around 7% and 5% respectively last year, as buyer demand was consistently higher throughout 2024. That’s given the group a solid platform to build on over the rest of 2025.”

Persimmon, like many listed housebuilders, has experienced a slow rot in its share price over the past year, and today’s news has provided a catalyst for a bounce off key support around the 1,000p.

Taylor Wimpey and Barratt Redow rose in sympathy and helped carve out gains for the FTSE 100.

JD Sports fell 8% and was the FTSE 100’s biggest faller after further reducing their profit guidance amid challenging trading conditions.

“JD Shareholders have had a tough 12 months as it is, and unfortunately this morning’s update has added more fuel to the fire. The company has warned on profit, bringing the top end of guidance down by 100 million amid challenging and volatile conditions,” said Adam Vettese, market analyst at investment platform eToro.

“It’s seems the supermarkets were the exception rather than the rule when it comes to retail performance over this past Christmas, as JD struggled in November and December, dashing any hopes of saving an already poor year.”