The FTSE 100 was firmly on the front foot on Wednesday as traders digested a softer-than-expected UK inflation reading that pointed to further interest rate cuts by the BoE before the end of the year.
London’s leading index was trading at 0.9% higher at the time of writing.
UK CPI came in below the psychologically key 4% level, and although the 3.8% reading is far above the Bank’s target rate of 2%, it was lower than expected, and markets appear to deem it acceptable to cut rates. Interest rate futures quickly priced in additional rate cuts later this year.
“A lower-than-expected reading of UK inflation makes a near-term cut to interest rates more likely and this boosted housebuilders,” said AJ Bell investment director Russ Mould
“It also led to weakness in the pound which is typically good news for the FTSE 100 because it increases the relative value of the overseas earnings which dominate the index.”
Persimmon, Barratt Developments and Berkeley Group rose between 2%-3%.
Barclays was the top FTSE 100 riser after the bank released an encouraging set of Q3 results and announced a fresh £500m share buyback. The bank did reveal a higher provision for the motor finance scandal, but it was far lower than that of its peers.
“If investors were looking for some reassurance after a tricky little spell for the banking sector then Barclays has provided it,” Russ Mould explained.
“Barclays was caught up in market concerns about the US private credit situation last week, with the company having some direct exposure to the collapse of sub-prime auto lender and car retailer Tricolor. It also has the broadest US exposure among its London-listed peers.”
Barclays shares were over 4% higher at the time of writing.
Reckitt Benckiser was another FTSE 100 group to report on Wednesday, and its shares received a strong reaction in early trade. However, gains quickly turned to losses despite their reporting surprisingly strong third-quarter sales growth, which will go a long way toward squashing fears of stagnation.
“Core like-for-like sales growth of 6.7% was well ahead of market forecasts, with the beat driven by impressive growth in emerging markets,” explained Aarin Chiekrie, equity analyst, Hargreaves Lansdown.
“The group’s portfolio has been streamlined in recent years, but there’s something to be said for focusing on strong brands, with household names like Dettol, Durex, and Vanish all continuing to impress.
“The only slight disappointment was that full-year guidance wasn’t raised, but with such a strong start to the second half, full-year targets look well within reach.”