London stocks surged higher on Wednesday after UK inflation slowed dramatically in October, undershooting forecasts and reinforcing expectations of a peak in interest rates.
The FTSE 100 index rallied over 1% in early trade, led by gains in real estate and retail stocks following the surprise inflation data. The more domestic-focused FTSE 250 also climbed over 1%.
Annual UK consumer price inflation dropped to 4.6% last month from September’s 6.7% pace. The reading was below the 4.8% forecast and cements hopes that UK rates are nearing their peak.
Taylor Wimpey and Rightmove both rose over 2% in the FTSE 100, while Experian surged 5% after the data firm reported higher profits. Retailers including JD Sports and Primark-owner AB Foods also gained over 1.5% each amid optimism that falling inflation will support consumer spending.
The inflation cool-down reinforces bets the Bank of England could start cutting rates by mid-2023. Markets are now betting rates will peak early next year before declines begin.
The FTSE 100 saw broad-based gains following the data surprise. Miners also climbed as a weaker pound boosted commodity prices.
With price pressures potentially past their peak, investors are growing more confident central banks can tame inflation without triggering sharp slowdowns. The latest UK data added to optimism major economies can achieve a “soft landing.”