FTSE Open: UK inflation drop revives hopes for BoE rate cuts

Stocks in London rallied on Wednesday morning as UK consumer price inflation for November came in lower than expected, which spurred hopes that the Bank of England (BoE) could consider interest rate cuts early next year.

The FTSE 100 index advanced 0.9% to hit its highest level since May.

The domestically-inclined FTSE 250 midcap index also added 0.9%, hitting an over seven-month high. Heavyweight energy stocks added 1.6%, boosted by higher crude oil prices, while banks jumped 1.2%.

Most major FTSE 350 sectors rallied, with travel and leisure and life insurers among the top gainers, rising more than 1% each. Yields on UK government bonds also fell, with the yield on the benchmark 10-year gilt last at 3.549%.

Among individual stocks, Intertek Group jumped 3.1% after Exane BNP Paribas upgraded the product testing company’s rating to “outperform” from “underperform”.

Pharmaceutical firm Indivior added 4.3%, as it settled a patent dispute with Teva subsidiary Actavis concerning the latter’s abbreviated new drug application for generic buprenorphine and naloxone sublingual film.

Petrofac soared over 40% after the oilfield services provider secured a $1.4 billion contract.

The British pound dropped 0.5% after official data showed inflation fell to 3.9% in November from 4.6% in October – the lowest reading since September 2021 and more than any economist had predicted.

“The fall in headline inflation has been driven largely by lower oil, gas and food prices, with core inflation still high at 5.1%,” said Nicholas Hyett, Investment Analyst at Wealth Club.

Investors are now betting on rate cuts by the BoE in the first half of 2024, with the first potentially in March.