(Sharecast News) - London stocks had hit fresh highs by midday on Wednesday, with miners and defence firms pacing the gains, as the latest UK inflation increased the likelihood of a March rate cut.
The FTSE 100 was up 1.1% at 10,671.36, having breached 10,600 for the first time.
Figures released earlier by the Office for National Statistics showed that inflation fell to its lowest level in nearly a year in January. The consumer price index declined to 3% from 3.4% in December, coming in as expected and marking the lowest rate of annual inflation since March 2025.
Food and non-alcoholic beverages prices rose 3.6% in January, down from 4.5% in the 12 months to December 2025, while services inflation fell to 4.4% from 4.5%.
Core inflation - which excludes energy food, alcohol and tobacco - rose 3.1% in the 12 months to January, down from 3.2% in December and the lowest rate since September 2021, when it was 2.9%.
ONS chief economist Grant Fitzner said: "The cost of raw materials for businesses fell over the past year, driven by lower crude oil prices, while the increase in the cost of goods leaving factories slowed."
Fitzner added: "Airfares were another downward driver this month with prices dropping back following the increase in December. Lower food prices also helped push the rate down, particularly for bread and cereals and meat. These were partially offset by the cost of hotel stays and takeaways."
Russ Mould, investment director at AJ Bell, said that inflation dropping to a 10-month low increases the chances of an interest rate cut when the Bank of England meets next month. This is "typically good news for stocks and shares in general," he said, adding that it's also a positive for the FTSE 100 given the likely knock-on effect on the pound.
"Lower rates typically translate into weaker sterling which, in turn, flatters the overseas earnings which dominate the index," Mould said.
"Mining, energy and defence firms were all in demand in early trading after results from Glencore and BAE Systems. Oil prices were higher as Trump rattled the sabres on Iran amid ongoing negotiations between Tehran and Washington over the former's nuclear programme.
"Later on, attention will be centred on the minutes of the latest meeting of the Federal Reserve as investors weigh the possible trajectory of rates across the Atlantic."
In equity markets, weapons maker BAE Systems rose after it reported a better-than-expected increase in annual profits as it cashed in on higher government defence spending amid rising geopolitical tensions. The company said full-year underlying operating profit jumped 12% to 3.32bn, beating expectations of a 9% to 11% increase, with its order backlog hitting a record 83.6bn.
Peers gained, with Babcock, Rolls-Royce and Qinetiq also higher.
Mining giant Glencore advanced as its full-year earnings declined less than expected. Miners more generally enjoyed solid gains amid higher copper prices, with Antofagasta, Anglo American and Rio Tinto all higher.
On the FTSE 250, Raspberry Pi rocketed again amid optimism that AI will fuel demand for its computers.
Car dealership Inchcape got a boost after JPMorgan placed the shares on 'positive catalyst watch' ahead of its full-year results and hiked the price target on the neutral-rated stock to 880p from 800p.
Market Movers
FTSE 100 (UKX) 10,671.36 1.09%
FTSE 250 (MCX) 23,618.29 0.27%
techMARK (TASX) 6,155.87 0.87%
FTSE 100 - Risers
Antofagasta (ANTO) 3,767.00p 4.15%
Airtel Africa (AAF) 360.40p 3.98%
BAE Systems (BA.) 2,099.00p 3.45%
Anglo American (AAL) 3,600.00p 2.89%
Glencore (GLEN) 498.35p 2.54%
HSBC Holdings (HSBA) 1,301.20p 2.44%
Barclays (BARC) 485.45p 2.43%
Rolls-Royce Holdings (RR.) 1,327.50p 2.35%
St James's Place (STJ) 1,247.00p 2.30%
NATWEST GROUP (NWG) 628.20p 2.28%
FTSE 100 - Fallers
Diageo (DGE) 1,758.00p -2.12%
Relx plc (REL) 2,179.00p -2.07%
Flutter Entertainment (DI) (FLTR) 9,058.00p -1.67%
Entain (ENT) 567.40p -1.60%
Rightmove (RMV) 429.00p -1.56%
BT Group (BT.A) 205.50p -1.39%
DCC (CDI) (DCC) 5,170.00p -1.15%
Smurfit Westrock (DI) (SWR) 3,700.00p -1.02%
Legal & General Group (LGEN) 272.80p -0.91%
Games Workshop Group (GAW) 16,760.00p -0.89%
FTSE 250 - Risers
Raspberry PI Holdings (RPI) 521.00p 25.54%
Inchcape (INCH) 869.50p 3.88%
Investec (INVP) 647.00p 3.03%
Pan African Resources (PAF) 150.00p 2.88%
AO World (AO.) 102.00p 2.72%
QinetiQ Group (QQ.) 511.50p 2.59%
Princes Group (PRN) 430.25p 2.08%
Wetherspoon (J.D.) (JDW) 764.50p 1.93%
Chemring Group (CHG) 531.00p 1.92%
Shawbrook Group (SHAW) 462.50p 1.87%
FTSE 250 - Fallers
HGCapital Trust (HGT) 450.00p -4.66%
Trustpilot Group (TRST) 133.40p -2.41%
The Renewables Infrastructure Group Limited (TRIG) 66.00p -2.22%
AEP Plantations (AEP) 1,470.00p -2.00%
IntegraFin Holding (IHP) 323.00p -1.82%
GB Group (GBG) 198.00p -1.74%
Wizz Air Holdings (WIZZ) 1,405.00p -1.68%
Elementis (ELM) 168.40p -1.52%
WH Smith (SMWH) 684.00p -1.37%
Aston Martin Lagonda Global Holdings (AML) 58.95p -1.34%
149.02 (1.41%)
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