A dip in inflation today eased pressure on Rachel Reeves and boosted hopes of a February interest rate cut.
On the corporate front, Currys has raising profits guidance alongside a strong festive update.
Pubs chain Mitchells & Butlers also struck an upbeat tone after like-for-like sales rose 10.4% in the peak period.
FTSE 100 Live Wednesday
- Currys ups guidance and restores divi
- Pub chain toasts strong Christmas
- Royal Mail on track for profit
Market update: UK stocks rally on rate cut hopes, Currys up 11%
10:20 , Graeme EvansInflation’s surprise dip to 2.5% triggered a relief rally for London-listed stocks today as traders revised their bets on a February interest rate cut.
Housebuilders, property firms and utilities were among the beneficiaries to leave the FTSE 100 index up by a better-than-expected 0.7% or 56.34 points at 8257.88.
The UK-focused FTSE 250 index jumped 1.4% or 272.46 points to 20,038.73, while there were firmer sessions for sterling and long-term government bonds following a week of volatility.
The City’s year-end estimates for the Bank of England bank rate fell from.4.42% to 4.18%, suggesting two cuts this year from the current level of 4.75%.
The revision follows a below-estimate inflation reading of 2.5% as prices in the services sector moderated sharply to 4.4% in December from 5% in November.
The possibility that pricing power has been sapped by a drop-off in demand will be tested tomorrow with the release of the UK’s GDP reading for December.
Peel Hunt economist Kallum Pickering added: “Although we remain cautiously optimistic in our economic outlook for the UK, risks remain tilted to the downside near-term.”
The City is braced for inflation to accelerate over the first half of 2025, driven by higher wage costs, before falling back towards the 2% target in 2026.
In the meantime, traders appeared happy to take a positive view of mortgage market pricing by sending Persimmon shares up 4% or 45.5p to 1159.5p and Barratt Redrow ahead by 13.4p to 416.2p.
Economic bellwether Lloyds Banking Group rose 4% or 2.1p to 55.7p, ahead of rival NatWest after its shares lifted 2% or 8.4p to 394.3p.
The prospect of lower debt costs boosted Severn Trent by 70p to 2408p while Land Securities led a real estate resurgence with a gain of 15.5p to 548p.
At the other end of the FTSE 100, Anglo American reversed 26.5p to 2445.5p after RBC downgraded the mining giant to Underperform.
In the FTSE 250, building materials specialist Travis Perkins rallied 4% or 23p to 677p, specialist mortgage lender OSB by 14.2p to 380.2p and the property agency Savills by 33p to 990p.
Among companies reporting today, Currys shares bounced 11% or 8.8p to 90.8p after it raised profit guidance and pledged to resume dividend payments following a strong festive performance.
Chief executive Alex Baldock said: “We start 2025 confident that our strategy is working.”
Mitchells & Butlers, whose brands include Harvester and All Bar One, also put on 9.5p to 237.5p after it posted like-for-like sales growth of 10.4% for its peak three-week festive trading period.
The chain expects to report profit growth, despite an estimated £100 million of wage-led cost headwinds in the current financial year.
The best performing FTSE 250 stock was animal genetics firm Genus, which jumped 19% or 270p to 1694p after half-year trading ahead of expectations.
Pfizer raises £2.5bn in Haleon stake sale
09:00 , Graeme EvansPfizer has raised £2.5 billion after selling 700 million shares in the FTSE 100-listed consumer health care business Haleon.
The disposal at a price of 357p cut Pfizer’s stake from 15% to 7.3%, having been more than 30% when the former GSK joint venture business floated at 330p in July 2022.
Weybridge-based Haleon, whose brands include Panadol, Sensodyne and Centrum, rose 2.3p to 369.4p following the move.
Royal Mail on track for profit return
08:50 , Graeme EvansRoyal Mail remains on track to return to annual profit after its owner reported further operational and financial improvement over the Christmas period.
International Distribution Services (IDS) said the projected 2024-25 operating profit was a significant milestone for Royal Mail after two years of losses.
Royal Mail revenues lifted 2.4% in the three months to the end of December, with sales of parcels up 3.2% and a 1.4% rise for letters.
The business delivered more than 99% of items that were posted on or before the recommended cut off date in time for Christmas.
IDS added that addressed letters continued to fall by volume, down 7%, but that this was offset by stamp price rises.
The takeover of IDS by Czech billionaire Daniel Kretinsky’s EP Group is expected to finalise by the end of the first quarter, having been cleared by the Government last month.
US inflation rate set for increase to 2.9%
08:33 , Graeme EvansInflation figures for the US are also due to be released later, with Wall Street braced for an acceleration in the annual rate for a third consecutive month.
Deutsche Bank economists are projecting headline CPI to come in at a monthly 0.4%, thanks to strong seasonally adjusted gains in food and energy prices.
That would be the fastest pace in 10 months, and push up the year-on-year rate by two-tenths to 2.9%.
The bank sees the core rate falling to 0.23%, the slowest pace in five months, which would keep the year-on-year rate steady at 3.3%.
FTSE 100 higher as rate-sensitive stocks rally, Currys up 12%
08:23 , Graeme EvansThe FTSE 100 index is up 0.7% or 54.71 points to 8,256.25 and the ten-year bond yield down to 4.82% in the aftermath of this morning’s inflation dip.
Housebuilders and rate-sensitive stocks were the biggest beneficiaries as Persimmon rose 5% or 53p to 1167p, United Utilities lifted 30p to 967.6p and Land Securities rallied by 3% or 15p to 5475.p.
Among companies reporting today, Currys shares jumped 12% or 9.65p to 91.65p following its Christmas update. Pubs chain Mitchells & Butlers rose 5% or 11.5p to 239.5p and Vistry lifted 30.7p to 545.2p.
Inflation dip boosts rate cut hopes
07:53 , Graeme EvansThe FTSE 100 index is pointing higher after the unexpected dip in inflation rate to 2.5%.
Capital Economics said underlying price pressures were a bit more favourable than first thought, boosting the chances of a February cut in interest rates.
The consultancy expects CPI inflation to rebound in January, perhaps to almost 3% and that the figure will be a little higher than most expect in the first half of this year.
“But we expect it to drop below the 2% target next year as the persistence of inflation fades further,” it told clients.
Deutsche Bank economist Sanjay Raja said: “Looking ahead, price momentum will likely pick up from here.
“Increases to the National Living Wage and employer National Insurance Contributions will, we expect, push inflation higher over 2025.
“Higher energy prices won't help either – nor will higher food prices, which are starting to emerge.
“That said, the jump in price momentum will likely be temporary, with price inflation expected to normalise to more target-consistent levels next year.”
Mitchells & Butlers backs targets after strong Christmas
07:40 , Graeme EvansMitchells & Butlers, whose brands include Harvester and All Bar One, grew like-for-like sales by 10.4% over its peak three-week festive trading period.
Across the first quarter to 11 January, like-for-like sales rose 3.9%.
The chain said it faces an estimated £100 million of year-on-year cost headwinds in the current financial year, primarily increased labour costs.
Despite these pressures, it continues to forecast profit growth and market outperformance.
Chief executive Phil Urban added: “Growth was particularly strong on festive key dates supported by volume growth, and with record sales on Christmas Day.
“Cold and stormy weather over recent weeks has subsequently had a material adverse impact on trading but we remain confident in the strength of underlying sales growth.”
Currys ups guidance after strong peak trading, dividend resumes
07:20 , Graeme EvansCurrys has raised profit guidance and pledged to resume dividend payments after the retailer reported a strong festive performance today.
Like-for-like sales rose by 2% in the UK and Ireland, fuelled by strong demand in mobile, gaming and premium computing. The Nordics arm rose 1%.
Profits for the April financial year are set to be between £145 million and £155 million, representing growth of up to 31% and ahead of the City consensus.
An improved balance sheet means the company expects to resume dividend payments with a distribution of 1.3p a share alongside full-year results in July.
Chief executive Alex Baldock said: “We start 2025 confident that our strategy is working.”
Inflation rate below forecasts at 2.5% in December
07:07 , Graeme EvansThe UK’s inflation rate rose eased to 2.5% in December, down from 2.6% in November and one-tenth below the forecast of City economists.
The largest downward contribution to the monthly change came from restaurants and hotels, with the largest upward contribution from transport.
Core inflation came in at 3.2%, which compared with 3.5% in November and the 3.4% forecast.
FTSE 100 seen flat, US banking results in focus
07:00 , Graeme EvansWall Street shares were mixed last night as attention turned to the release of US earnings, starting with JPMorgan Chase and Goldman Sachs later today.
The Dow Jones Industrial Average rose 0.5% and the S&P 500 index by 0.1%, while the tech-focused Nasdaq Composite fell 0.2%.
The FTSE 100 index fell 0.3% last night and is forecast to open today’s session flat at 8201.
The pound is just below $1.22 ahead of the release of today’s monthly inflation figure.
