London close: FTSE nudges up as housebuilders, banks rally; Fed, BoE eyed

(Sharecast News) - London stocks ended just a smidgen higher on Wednesday as investors erred on the side of caution ahead of a pivotal Federal Reserve policy announcement and as the latest UK inflation reading eased pressure on the Bank of England to hike rates.

The FTSE 100 closed up 0.1% at 10,508.61, while Brent crude was up 0.7% at $79.52 a barrel and West Texas Intermediate was 0.8% higher at $76.67 after Donald Trump threatened to resume bombing if he does not like the peace deal with Iran.

Speaking on the sidelines of the G7 summit in France, the US president said: "It's a memorandum of understanding. And if I don't like it, we'll go back to shooting at them, dropping bombs on `their head. If I don't like it, if they don't behave, we'll go right back to dropping bombs right smack in the middle of their head, OK?"

Ahead of Thursday's latest policy announcement from the BoE, figures from the Office for National Statistics showed the annual rate of consumer price inflation was unchanged at 2.8% last month, versus expectations for a rise to 3.0%.

The headline rate stayed at its lowest since March 2025, though core inflation edged higher to 2.6% from 2.5%.

Neil Wilson, UK investor strategist at Saxo Markets, said: "It takes a rate hike by the Bank of England completely off the table, and should help prevent the MPC swinging behind a hike in July. OK some of the inflation from the closure of the Strait of Hormuz is yet to show up, but it's looking like the passage is reopening anyway."

The BoE is widely expected to stand pat on rates at 3.75%.

Investors were also keeping their powder dry ahead of the first Fed policy decision under new chief Kevin Warsh on Wednesday evening, albeit no change in interest rates is expected. All eyes will be on the subsequent press conference to see what tone Warsh sets, with the Fed chief under pressure from the Trump administration to lower rates despite a ramp-up in inflation caused by the Iran war.

"This is a tricky time for a new Fed chair to set policy. With rates expected to remain unchanged in the coming months, the biggest focus will be on the FOMC Press conference, which could be more interesting than usual," said Kathleen Brooks, research director at XTB. "Warsh's messaging and how he frames his views on the economy and the future of monetary policy will be closely scrutinised."

In equity markets, rate-sensitive housebuilders and banks were among the top gainers, with Persimmon, Barclays, Barratt Redrow, Standard Chartered, HSBC, Berkeley Group, Lloyds, Vistry, Taylor Wimpey and Bellway all up.

Russ Mould, investment director at AJ Bell, said: "Inflation holding steady was the last thing anyone expected in the face of higher oil prices caused by the Iran war. Central banks typically raise interest rates to fight inflation, and the latest reading suggests the Bank of England doesn't need to rush to change monetary policy direction.

"While banks would normally benefit from higher interest rates, the inflation reading is positive for consumer and business sentiment as it implies cost pressures aren't as severe as previously expected. That in turn could drive greater appetite for borrowing, including mortgages.

"Housebuilders are at the mercy of interest rates and a significant shift in rate expectations over the past week will be music to their ears. A week ago, the market was pricing in two rate hikes by early 2027 - that's now been pared back to just one hike this December and no further change for at least the first half of next year."

Elsewhere, AO World lost ground despite posting a 11.4% jump in revenues over the most recent fiscal year. Looking to the current year, the online electricals retailer acknowledged that the external environment remained "uncertain", including inflationary pressures.

Market Movers

FTSE 100 (UKX) 10,508.61 0.14%

FTSE 250 (MCX) 23,364.73 0.16%

techMARK (TASX) 5,895.02 -0.15%

FTSE 100 - Risers

Persimmon (PSN) 1,119.00p 4.34%

Barclays (BARC) 503.50p 3.40%

Metlen Energy & Metals (MTLN) 41.98p 3.09%

Barratt Redrow (BTRW) 261.90p 2.67%

Standard Chartered (STAN) 2,037.00p 2.34%

Weir Group (WEIR) 2,502.00p 2.12%

HSBC Holdings (HSBA) 1,437.00p 1.94%

Berkeley Group Holdings (The) (BKG) 3,560.00p 1.89%

Kingfisher (KGF) 289.60p 1.83%

Lloyds Banking Group (LLOY) 105.80p 1.73%

FTSE 100 - Fallers

Entain (ENT) 567.40p -4.57%

Halma (HLMA) 3,874.00p -4.25%

Marks & Spencer Group (MKS) 359.60p -3.39%

Rightmove (RMV) 427.20p -2.89%

British American Tobacco (BATS) 4,471.00p -2.87%

Sainsbury (J) (SBRY) 301.40p -2.62%

Compass Group 11 (CPG) 32.76p -2.62%

Burberry Group (BRBY) 1,127.50p -2.59%

LondonMetric Property (LMP) 182.40p -2.04%

British Land Company (BLND) 412.00p -1.95%

FTSE 250 - Risers

Vistry Group (VTY) 245.00p 6.43%

Endeavour Mining (EDV) 4,434.00p 5.00%

Close Brothers Group (CBG) 464.40p 3.94%

Taylor Wimpey (TW.) 79.56p 3.46%

Bellway (BWY) 1,873.00p 3.37%

Pan African Resources (PAF) 118.20p 3.05%

Baltic Classifieds Group (BCG) 194.00p 2.92%

HGCapital Trust (HGT) 402.50p 2.68%

Ashoka India Equity Investment Trust (AIE) 249.00p 2.47%

Aston Martin Lagonda Global Holdings (AML) 41.54p 2.42%

FTSE 250 - Fallers

SDCL Efficiency Income Trust (SEIT) 32.25p -6.52%

AO World (AO.) 91.50p -4.69%

Chemring Group (CHG) 496.60p -3.39%

Shawbrook Group (SHAW) 322.50p -2.86%

Dr. Martens (DOCS) 70.50p -2.76%

Pagegroup (PAGE) 119.10p -2.62%

Mitie Group (MTO) 151.80p -2.19%

Telecom Plus (TEP) 970.00p -2.12%

AEP Plantations (AEP) 1,622.00p -2.05%

XP Power Ltd. (DI) (XPP) 1,970.00p -1.99%