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The FTSE 100 posted strong gains on Wednesday as a bigger-than-expected fall in inflation and a rise in oil prices helped.
The FTSE 100 index closed 89.53 points, 0.9%, higher at 9,774.32. Earlier it had traded at a high of 9,853.13.
The FTSE 250 rose 123.78 points, 0.6%, to close at 22,164.76, and the AIM All-Share rose 2.07 points, 0.3%, to 751.48.
Soft UK inflation data on Thursday cemented expectations of a Bank of England (BoE) interest rate cut and raised the possibility of further cuts in 2026, analysts said.
barclays Said it “removes the final hurdle that, in our view, could prevent the BOE from cutting bank rates tomorrow”.
According to data published by the Office for National Statistics, the headline consumer price index (CPI) rose 3.2% year-on-year in November, slower than 3.6% in October, and well below the FXStreet-quoted consensus of 3.5%.
On a monthly basis, the CPI declined 0.2%, compared with a 0.1% increase a year earlier.
The November figure was below the 3.4% forecast in the most recent BoE monetary policy report. Similarly, core CPI inflation, which excludes energy, food, alcohol and tobacco, slowed to 3.2% from 3.4%, compared with expectations of it remaining unchanged.
Moreover, CPI services inflation declined to 4.4% from 4.5% in October, compared to the forecast of it remaining unchanged. CPI goods inflation slowed to 2.1% from 2.6%.
“UK price pressures are easing sharply amid continued softening of demand growth. We expect headline inflation to fall to the BoE’s 2% target over the next year,” said Kallum Pickering, chief economist at Peel Hunt.
Mr Pickering thinks the risk now is that the BoE “has fallen behind the curve and may need to catch up in 2026”.
“We will pay careful attention to the voting patterns and future guidance, which will come with tomorrow’s BOE decision as a signal that the bank is prepared to act hard against downside risks,” he said.
“Don’t be surprised if the BOE sends a soft signal that it’s willing to lean against downside risks next year – which could mean cutting back on frequent meetings.”
The BOE is expected to cut 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 rose to 97% from 92% on Thursday, while expectations for the total number of cuts next year rose to 2.7 from 2.4.
He said currency markets now see a 65% chance of a cut in the first quarter of 2026, up from 45% before Wednesday’s data.
At that time the value of the pound was said to be 1.3359 dollars. London Shares closed Wednesday at $1.3429, compared with $1.3429 on Tuesday.
Rate-sensitive housebuilders were in vogue, with Barrett Redrow up 3.7% and Persimmon up 2.3%.
The jump in oil prices also provided support in London, where Shell was up 1.4% and BP up 0.7%.
At the time of closing of the London Stock Exchange on Wednesday, the price of Brent oil was $ 59.91 per barrel, which was $ 59.01 late on Tuesday evening.
Kathleen Brooks at XTB said the price change came after US President donald trump Announced a “complete and total blockade of all sanctioned oil tankers going in and out of Venezuela.”
“This is an unusual move, normally a blockade requires congressional consent, so this is a serious escalation in incidents. Venezuela has the largest share of the world’s oil reserves, so this blockade has caused turmoil in the energy market,” Ms Brooks said.
In Europe on Wednesday, the CAC 40 in Paris closed 0.3% lower, while the DAX 40 in Frankfurt closed 0.5% lower.
The euro fell to $1.1749 from $1.1775. Against the yen, the dollar was trading at 155.55 yen compared with 154.79 yen.
Stocks were lower in New York at the time London equities closed on Wednesday.
The Dow Jones Industrial Average was down 0.2%, the S&P 500 index was 0.7% lower, while the Nasdaq Composite lost 1.1%.
yield on us 10 year treasure It was quoted at 4.17% flat from Tuesday. The yield on the US 30-year Treasury was 4.83%, also unchanged from Tuesday.
In London, insurer Phoenix Group rose 3.3% after UBS upgraded it to ‘buy’ from ‘neutral’, while Berenberg’s upgrade supported the miner. glencoreWhich increased by 1.5%.
Bunzel fell 2.0% after backing its 2025 guidance, but cautioning that its operating margins are expected to be slightly lower in the coming year.
In response, JPMorgan analyst Jane Sparrow cut 2026 earnings per share forecasts by 4% and revenue estimates by 1%, saying the bulk of the EPS downgrade was margin-driven, reflecting continued operating expense inflation but without offsetting price inflation.
On the FTSE 250, Serco climbed 7.4% after it upgraded guidance for underlying operating profit for this year, citing growth in the defense sector.
The Hampshire-based government services outsourcing provider said it now expects underlying operating profit of around £270 million in 2025, up 3.8% from previous guidance of £260 million, but down 1.5% from £274 million in 2024.
“We believe Serco is well positioned with a growing defense budget, attractive fundamentals and strong balance sheet optionality,” Peel Hunt analysts said.
But after last week’s critical note from Grizzly Research, Ceres Power’s troubles continued with a further decline of 6.1%.
Hunt declined 4.6% as Jefferies downgraded it to ‘hold’ from ‘buy’.
On Wednesday, gold rose to $ 4,326.25 an ounce from $ 4,304.60.
The biggest risers on the FTSE 100 were Barrett Redrow, up 13.30 pence at 375.00p, Phoenix Group, up 23.00p at 719.00p, Convetec, 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, Bunzel, 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 also features interest rate decisions in the UK, Europe, Norway and Sweden, as well as US inflation data.
Thursday’s UK corporate calendar features half-year results for electricals retailer Currys.
– Contributed by Alliance News