FTSE Close: London stocks rally on cooling inflation

Stocks in London soared on Wednesday, rallying on a sharp drop in the annual UK inflation rate that boosted hopes for interest rate cuts next year.

The FTSE 100 jumped 1.0% to close at 7,715.68, led by housebuilders. The FTSE 250 ended up 1.6% at 19,629.09, while the AIM All-Share gained 0.8% to finish at 751.44.

UK consumer price inflation eased faster than forecast, cooling to 3.9% year-on-year in November from 4.6% in October. The reading came in below the 4.4% rise expected by analysts.

With inflation hitting a recent peak of 11.1% in October 2022, investors are now pricing in a 25 basis point rate cut by the Bank of England in Q2 2023, followed by another in Q3, according to Trading Economics.

Among housebuilders, Barratt Developments rose 1.3%, Taylor Wimpey gained 0.5%, and Berkeley Group edged up 0.6% as UK house prices fell 1.2% annually in October.

Shell closed up 1.5% after its Shell Offshore subsidiary announced the $14 billion Sparta project in the US Gulf of Mexico, expected to produce 90,000 barrels of oil per day from 2028.

In the FTSE 250, John Wood Group climbed 4.1% on new HR and legal hires. Engineering firm Petrofac rocketed 42% on $6.8 billion in new energy orders expected in 2023.

On AIM, Angus Energy jumped 21% after securing a $20 million debt facility from Trafigura to raise production at its Saltfleetby field.

Other notable gainers included Saga up 10%, Treatt up 7.2%, Pollen Street up 6.6% and Marstons rising 6.6%. The biggest fallers were Cab Payments, down 6.4%, Oryx International Growth, losing 5%, and Trifast and Superdry both falling over 4%.