London stocks ended off highs but firmly in the black on Wednesday as the latest UK inflation data cemented expectations of a rate cut from the Bank of England https://www.sharecast.com/news/news-and-announcements--/uk-manufacturing-downturn-eases-in-december---cbi--21392432.htmlthis week.
The FTSE 100 closed up 0.9% at 9,774.32, giving back some earlier gains later in the session as US markets slid amid renewed concerns about AI valuations. Meanwhile, sterling was down 0.2% against the dollar at 1.3393, recovering from heavier losses earlier in the session.

Figures from the Office for National Statistics showed inflation fell by more than expected in November, to the lowest level for eight months.

The consumer prices index rose by 3.2% in the 12 months to November, down from 3.6% in October. Consensus had been for 3.5%.

The Bank of England will announce its latest decision on interest rates on Thursday, and the fall will further bolster arguments for a cut. Should that be the case, it would be the fourth this year.

However, inflation still remains above the BoE's long-term 2% target.

Food and non-alcoholic beverages - which normally rise at this time of the year - made the largest downward contributions to inflation in November, the ONS said. Prices rose by 4.2%, down from 4.9% in October.

The biggest downward effects were seen in the prices of cakes, biscuits and breakfast cereals. Softer prices in dairy products and sugar - including jams and confectionary - also contributed.

Grant Fitzner, chief economist at the ONS, added: "The increase in the cost of goods leaving factories slowed, driven by lower food inflation, while the annual cost of raw materials for businesses continued to rise."

Core inflation, which strips out the more volatile elements of energy, food, alcohol and tobacco, fell to 3.2% from 3.4%.

Danni Hewson, head of financial analysis at AJ Bell, said: "There are a number of reasons why falling inflation is a boon for the stock market. It means a less constrained consumer, who can spend more on the goods and services of listed companies. It also means those companies themselves face lower costs, and in theory, that includes lower wage demands too, especially in a slowing labour market.

"Inflation heading back to target also suggests lower interest rates are on the cards, which would be good for companies with debt on their balance sheet, and for their customers' spending habits too.

"Lower inflation and interest rates have also hit the pound, and that means the value of overseas revenues now weigh more in sterling, pushing up the share prices of the big blue chips with lots of international earnings.

"Housebuilders also found themselves in favour as investors reappraised the prospects for the property market through the lens of potentially lower mortgage rates. Rate-sensitive utility companies added to those chalking up some healthy gains and helped in the collective effort to raise the FTSE 100."

Investors were also mulling the latest survey from the Confederation of British Industry, which showed that the downturn in the manufacturing sector eased in December.

According to the latest Industrial Trends survey, output volumes fell in the period but at a slower pace than November, with a net balance of -21 in December, up from -30. A balance is the weighted percentage of firms reporting an increase and those reporting a decrease.

In equity markets, housebuilders were boosted by the prospect of a rate cut, with Barratt Redrow, Berkeley and Persimmon all higher.

Phoenix Group rallied after an upgrade to 'buy' from 'neutral' at UBS, while HSBC rose after an upgrade to 'outperform' from 'market perform' by KBW, which cited the strength of its Hong Kong business.

Government contractor Serco advanced as it lifted financial guidance on the back of contract wins, and announced the appointment of Proximus chief financial officer Mark Reid to the same role, succeeding Nigel Crossley.

International Personal Finance shot higher as it said the deadline for takeover talks with BasePoint Capital has been extended.

Shares in Transact owner IntegraFin sparked after it posted a jump in annual revenues and profits despite a volatile first half.

On the downside, Bunzl slumped as it backed its 2025 profit guidance despite "the ongoing macroeconomic challenges" in its key end markets, but the company's outlook for 2026 disappointed.

Market Movers

FTSE 100 (UKX) 9,774.32 0.92%
FTSE 250 (MCX) 22,164.76 0.56%
techMARK (TASX) 5,564.44 0.61%

FTSE 100 - Risers

Barratt Redrow (BTRW) 375.00p 3.68%
Phoenix Group Holdings (PHNX) 719.00p 3.30%
Convatec Group (CTEC) 242.20p 3.15%
HSBC Holdings (HSBA) 1,141.80p 2.70%
United Utilities Group (UU.) 1,203.00p 2.56%
Severn Trent (SVT) 2,769.00p 2.48%
Berkeley Group Holdings (The) (BKG) 3,924.00p 2.45%
Persimmon (PSN) 1,336.00p 2.34%
National Grid (NG.) 1,144.50p 2.05%
Unilever (ULVR) 4,881.50p 1.84%

FTSE 100 - Fallers

DCC (CDI) (DCC) 4,924.00p -3.55%
CRH (CDI) (CRH) 9,184.00p -3.20%
Bunzl (BNZL) 2,176.00p -1.98%
ICG (ICG) 2,024.00p -1.56%
Weir Group (WEIR) 2,814.00p -1.54%
IMI (IMI) 2,434.00p -1.38%
Halma (HLMA) 3,502.00p -1.35%
Diploma (DPLM) 5,310.00p -1.03%
Burberry Group (BRBY) 1,285.50p -0.92%
Admiral Group (ADM) 3,126.00p -0.51%

FTSE 250 - Risers

Serco Group (SRP) 270.80p 7.38%
RTW Biotech Opportunities Ltd (RTW) 2.15p 5.39%
SSP Group (SSPG) 199.90p 5.32%
International Personal Finance (IPF) 218.00p 5.31%
IntegraFin Holding (IHP) 354.00p 4.73%
Ithaca Energy (ITH) 164.70p 3.58%
Safestore Holdings (SAFE) 707.50p 2.83%
Baltic Classifieds Group (BCG) 201.50p 2.70%
Zigup (ZIG) 384.00p 2.40%
Bytes Technology Group (BYIT) 350.20p 2.34%

FTSE 250 - Fallers

Ceres Power Holdings (CWR) 218.20p -6.83%
Oxford Biomedica (OXB) 587.00p -2.49%
AJ Bell (AJB) 447.20p -2.19%
W.A.G Payment Solutions (EWG) 96.80p -1.63%
RS Group (RS1) 650.50p -1.59%
Baillie Gifford Japan Trust (BGFD) 884.00p -1.56%
Avon Technologies (AVON) 1,766.00p -1.45%
Rotork (ROR) 320.60p -1.41%
Bridgepoint Group (Reg S) (BPT) 280.00p -1.41%
Hill and Smith (HILS) 2,145.00p -1.38%