London close: FTSE rallies as investors cheer soft inflation data

(Sharecast News) - London stocks ended firmly in the black on Wednesday as investors welcomed softer-than-expected inflation data.

The FTSE 100 closed 1.2% higher at 10,716.97, hitting its highest level since March, while Brent crude was 2.5% firmer at $93.24 a barrel and West Texas Intermediate was up 2.2% at $86.22 as tensions between the US and Iran mounted.

Figures from the Office for National Statistics showed inflation eased to 2.6% in the 12 months to June from 2.8% in May. Economists had expected a slightly smaller dip to 2.7%.

The ONS said transport, and food and non-alcoholic beverages made the largest downward contributions to the change. Core CPI - which excludes energy, food, alcohol and tobacco - rose 2.6% in June, unchanged from May.

The update comes as new prime minister Andy Burnham begins to roll out measures intended to ease the cost of living, including removing VAT on household electricity bills. New chancellor John Healey said falling inflation was "news families want to hear, but there is much more to do to give people the breathing space they need".

Most expect the Bank of England to leave interest rates on hold at 3.75% when the Monetary Policy Committee meets next week. However, economists continue to believe that renewed hostilities in the Middle East could push inflation higher in the coming months.

Patrick Munnelly at Tickmill Group said softer UK inflation data had "strengthened confidence that the Bank of England can remain patient despite renewed Middle East tensions".

He continued: "The move extended the FTSE's recent momentum. Over the past four weeks, the UK benchmark has gained 3.03%, while over the last 12 months it has risen 18.58%. The index's ability to climb despite ongoing US-Iran tensions showed that investors were more focused on the domestic inflation surprise and the implications for monetary policy than on geopolitical risk alone."

In equity markets, Airtel Africa shot to the top of the FTSE 100 ahead of first-quarter results on Thursday.

Housebuilders Persimmon, Barratt Redrow, Taylor Wimpey and Bellway were on the front foot as investors mulled the prospect of lower borrowing costs.

Miners Antofagasta and Fresnillo both shone, while Babcock gained for the second day in a row, having risen on Tuesday on news of former Defence Secretary John Healy's appointment as chancellor.

Segro rose after US real estate giant Prologis upped its proposed takeover bid to �14bn, the latest twist in its pursuit of the blue chip landlord. The American firm has until end of play on Wednesday to make a firm offer or walk away, but so far Segro has rebuffed all previous approaches.

Centrica advanced as it confirmed further life extensions for two nuclear power stations, while convenience foods manufacturer Greencore surged as it said full-year adjusted operating profit would be above market expectations.

On the downside, easyJet tanked following a report the European Union is preparing a review of airline ownership rules to prevent foreign investors from gaining effective control of carriers - a move that could threaten US bids for the budget airline.

EasyJet announced earlier this month that it had agreed to be taken over by private equity firm Apollo in a �5.7bn deal which trumped an earlier proposal by Castlelake.

Pub chain JD Wetherspoon tumbled after it warned annual profits were likely to be below market expectations, with marginally lower sales than anticipated in the final quarter, combined with higher food, labour, repairs, energy and business rate costs.

Market Movers

FTSE 100 (UKX) 10,716.97 1.24%

FTSE 250 (MCX) 23,926.63 0.73%

techMARK (TASX) 5,956.60 1.05%

FTSE 100 - Risers

Airtel Africa (AAF) 349.00p 4.06%

Fresnillo (FRES) 2,660.00p 3.66%

Antofagasta (ANTO) 3,796.00p 3.52%

Persimmon (PSN) 1,093.50p 3.50%

SSE (SSE) 2,530.00p 3.27%

Centrica (CNA) 179.80p 3.21%

SEGRO (SGRO) 895.00p 2.94%

Weir Group (WEIR) 2,524.00p 2.94%

Prudential (PRU) 1,096.50p 2.67%

Babcock International Group (BAB) 1,112.50p 2.63%

FTSE 100 - Fallers

Flutter Entertainment (DI) (FLTR) 7,464.00p -3.52%

Burberry Group (BRBY) 1,050.50p -3.31%

Pearson (PSON) 1,207.00p -1.95%

Metlen Energy & Metals (MTLN) 43.26p -1.52%

Informa (INF) 866.40p -1.23%

IG Group Holdings (IGG) 1,724.00p -1.15%

The Sage Group (SGE) 827.60p -0.93%

Entain (ENT) 549.00p -0.90%

Next (NXT) 14,835.00p -0.77%

Scottish Mortgage Inv Trust (SMT) 1,347.00p -0.74%

FTSE 250 - Risers

Hays (HAS) 57.40p 6.69%

AEP Plantations (AEP) 180.00p 5.88%

Endeavour Mining (EDV) 3,743.00p 5.32%

Helios Towers (HTWS) 200.40p 5.20%

Raspberry PI Holdings (RPI) 719.00p 4.81%

Bridgepoint Group (Reg S) (BPT) 323.40p 4.80%

Rosebank Industries NPV (ROSE) 339.00p 4.63%

Bellway (BWY) 1,985.00p 4.31%

BlackRock World Mining Trust (BRWM) 908.00p 4.01%

Oxford Instruments (OXIG) 2,988.00p 3.97%

FTSE 250 - Fallers

easyJet (EZJ) 585.20p -11.79%

Wetherspoon (J.D.) (JDW) 722.50p -4.18%

Jupiter Fund Management (JUP) 163.40p -3.88%

Watches of Switzerland Group (WOSG) 730.00p -3.76%

VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 420.00p -3.45%

Ninety One (N91) 210.60p -2.95%

Quilter (QLT) 198.00p -2.94%

Wizz Air Holdings (WIZZ) 1,037.00p -2.81%

Mony Group (MONY) 193.10p -2.77%

Foresight Group Holdings Limited NPV (FSG) 475.50p -2.66%