FTSE 100 higher on softer inflation data

The FTSE 100 climbed on Wednesday as the release of softer-than-expected UK inflation figures fueled optimism for a potential reduction in interest rates.

At the open, the FTSE 100 index surged by 88.26 points, representing a 1.2% rise, reaching 7,541.95. The FTSE 250 gained 460.88 points, or 2.4%, to reach 19,079.10. The AIM All-Share climbed by 4.52 points, or 0.6%, to reach 758.88.

According to the Office for National Statistics, UK inflation in June cooled at a faster rate than anticipated. Consumer prices rose by 7.9% annually, indicating a slowdown compared to May’s significant jump of 8.7%. Market forecasts had predicted a rate of 8.2%. Although the inflation level remains high historically, it is the lowest recorded since March 2022.

This decline in inflation was primarily driven by easing price rises in motor fuels, as well as food and non-alcoholic beverages, furniture and household goods, and restaurants and hotels, as reported by the ONS.

Notably, the core inflation figure, excluding energy, food, alcohol, and tobacco, unexpectedly dropped to an annual rate of 6.9%. Analysts had anticipated it to remain unchanged from May’s reading of 7.1%.

Market participants swiftly adjusted their expectations, factoring in the possibility of lower interest rates. As a result, the mortgage sector outlook improved, leading to a rally in housebuilding stocks. Persimmon, Barratt, and Taylor Wimpey saw significant gains of 7.3%, 6.5%, and 6.6%, respectively.

In addition to the housing sector, other property-related stocks experienced positive momentum. Real estate platform Rightmove witnessed a rise of 3.5%, while St James’s Place recorded a 3.4% increase.

Exane BNP’s upgrade of commercial real estate firm Segro to “outperform” contributed to a notable 7.0% rise in its stock price.

Meanwhile, on the AIM market, shares of Watkin Jones plunged by 35%. The rental property developer and manager announced the resignation of Chief Executive Richard Simpson, with Chief Investment Officer Alex Pease taking on the interim role.

Hargreaves Lansdown, a retail investment platform, reported strong new business wins, leading to a 5.7% rise in its stock price. Net new business increased by 6% to £1.7 billion in the company’s fourth quarter, which ended on June 30. Furthermore, assets under administration grew by 1.5% over the quarter to reach £134.0 billion by the end of June.

In the small-cap segment of London’s market, Restaurant Group saw a 10% surge in its stock price. Despite lower footfall in May and June due to hot weather, the company reported a recent climb in sales. Notably, like-for-like sales at Wagamama saw an on-year increase of 21% in the two weeks leading up to July 16. This growth accelerated compared to 5% in the second quarter and 2% in the first quarter.