The FTSE 100 closed firmly higher on Thursday after fresh inflation data came in below expectations, strengthening hopes that the Bank of England may face less pressure to raise interest rates in the months ahead.
The blue-chip index finished 1.2% higher, while the FTSE 250 gained 0.7% as investors welcomed signs that price pressures continue to ease across the UK economy.
Official figures showed the consumer prices index rose 2.6% in the 12 months to June, slowing from 2.8% in May and beating expectations for a reading of 2.7%. On a monthly basis, inflation increased by 0.1%, matching forecasts and slowing from the 0.3% rise recorded a year earlier.
The Office for National Statistics said transport costs, alongside food and non-alcoholic beverages, made the largest downward contributions to the latest monthly inflation reading, prompting analysts to argue that the case for further Bank of England rate increases has weakened.
Mining stocks were among the strongest performers as gold prices climbed above $4,157 an ounce, encouraging buying across the sector. Endeavour Mining rose 5.3%, Fresnillo gained 3.7% and Antofagasta advanced 3.5%, helping drive the FTSE 100 higher.
Segro added 2.9% after markets closed as the property group confirmed its board would be prepared to recommend Prologis’ improved takeover proposal.
The revised offer values Segro at around £14.0 billion, or 1,031.7p per share, through an exchange of 0.0920 new Prologis shares for each Segro share. Prologis also increased the value of its partial cash alternative to as much as £3.5 billion and agreed to establish a secondary London listing before completion should a formal offer proceed.
On the FTSE 250, Greencore surged 8.5% after raising its full-year profit guidance following a stronger-than-expected third quarter.
The convenience food producer now expects adjusted operating profit of between £234 million and £242 million, comfortably ahead of previous market expectations and almost double the £125.7 million reported for the previous financial year.
easyJet slumped 12% after reports that the European Union is reviewing airline ownership rules to prevent foreign investors from taking control of European carriers.
The review comes as US investment firms Apollo and Castlelake compete for the airline, with EU officials reportedly seeking to preserve strategic control of regional aviation businesses.
JD Wetherspoon also came under pressure, falling 4.2% after warning that annual profit will miss market forecasts as rising food, labour, energy, repair and business rates continue to increase operating costs. Chairman Tim Martin said slightly weaker sales during the final quarter had added to the pressure on earnings.
Among smaller companies, Reach plunged 24% after reporting a first-half pre-tax loss of £45.3 million compared with a £27.0 million profit a year earlier. The newspaper publisher blamed weaker referrals from Google for reducing digital advertising revenue, while also cutting its interim dividend to 1.44p from 2.88p.
Elsewhere, European markets also finished higher, with Paris’ CAC 40 gaining 1.0% and Frankfurt’s DAX 40 adding 0.6%.
In the US, markets lost momentum late in the session despite strong quarterly results from Alphabet, whose cloud business helped revenue and earnings exceed expectations. The Dow Jones Industrial Average edged into negative territory, while the S&P 500 fell 0.1% and the Nasdaq Composite slipped 0.5%.