FTSE 100 gains as Middle East tensions subside, miners lead the way

The FTSE 100 was materially higher on Wednesday as Middle East tensions subsided and miners stormed higher and took the index with them.

The mining sector’s strength helped the FTSE 100 0.56% higher at the time of writing.

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The move higher in miners today is a delayed response to the better-than-expected Chinese GDP released earlier in the week, which was overshadowed by Middle East tensions.

The top five risers were all miners at the time of writing with Anglo American jumping 3.6% closely followed by Rio Tinto adding 2.9%. Rio Tinto gained despite announcing lower quarterly iron ore shipments and production.

Although the miners were doing most of the FTSE 100’s heavy lifting on Wednesday, the big domestic story was UK inflation falling to 3.2%, and there was evidence of optimism in UK-focused stocks on Wednesday.

“Inflation is moving in the right direction and anyone who has wheeled a trolly around a supermarket over the past few weeks will have noticed that prices aren’t delivering those checkout shocks in the same way they were this time last year,” said Danni Hewson, head of financial analysis at AJ Bell.

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“Next month should look even better as the falling energy price cap is finally counted in the numbers, even if many households won’t have noticed much difference to their outgoings as their direct debits remain elevated to pay off outstanding balances.

“But even in this set of figures there are a few troubling issues, notably the stickiness of service sector inflation. This could be exacerbated by the increase in the National Living Wage which is putting pressure on many businesses to hike prices again to balance their books.”

Despite nagging concerns about service inflation, FTSE 100 consumer-facing stocks were higher, with JD Sports up 2%, easyJet gaining 1.9%, and Frasers Group adding 1.6%.

However, gains were kept in check by the fact that inflation was higher than expected, which is likely to do little to encourage the Bank of England to cut rates sooner.

“While inflation is certainly moving in the right direction, it’s still higher than the market expected, which will disappoint those expecting an earlier-than-forecast interest rate cut from the Bank of England,” said Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown.

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