London midday: Stocks surge as inflation figures boost rate cut expectations

(Sharecast News) - London stocks had surged by midday on Wednesday, while sterling slumped as the latest UK inflation data cemented expectations of a rate cut from the Bank of England this week.

The FTSE 100 was up 1.5% at 9,828.76, while sterling was down 0.7% against the dollar at 1.3325.

A weaker pound tends to boost the top-flight index as around 70% of its constituents derive most of their earnings from abroad.

Figures released earlier by 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%.

Joshua Mahony, chief market analyst at Scope Markets, said: "Coming off the back of a jobs report that saw a higher unemployment rate, lower employment count, and higher claimants, markets can not only look forward to a rate cut but also a likely dovish tone from the BoE tomorrow.

"While markets are currently pricing a mere 50% chance that we see either 25bp or 50bp worth of cuts next year, the deterioration in the jobs market coupled with falling inflation could help raise hopes of a more accommodative BoE than has been predicted."

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 but at a slower pace than in 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.

The CBI said output declined in 15 of the 17 sub-sectors, with the decline driven by the chemicals, metal products, and mechanical engineering sub-sectors.

CBI lead economist Ben Jones said: "Manufacturing output is still falling, but the pace of decline has eased. Activity was clearly held back by uncertainty ahead of the Budget, and with that now out of the way firms can look to 2026 with a little more certainty.

"Significant headwinds remain nonetheless, with demand still soft, high energy, labour and regulatory costs squeezing margins, and uncertainty around key policies and global conditions continuing to weigh on confidence.

"To build momentum through 2026, the government must take action to lower the cost of doing business. This includes expediting and broadening support to tackle punitive industrial energy costs, collaborating to agree balanced solutions on the Employment Rights Bill through secondary legislation, and overhauling regulatory barriers to unlock investment and innovation."

In equity markets, Phoenix Group was the top performer on the FTSE 100 after an upgrade to 'buy' at UBS, while HSBC followed close behind after an upgrade to 'outperform' at KBW.

Glencore was also in the black after an upgrade to 'buy' at Berenberg, while housebuilders Barratt Redrow and Persimmon gained on rate cut expectations.

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

Government contractor Serco rallied 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 surged as it said the deadline for takeover talks with BasePoint Capital has been extended.

Miniature wargames manufacturer Games Workshop rose after it announced plans to pay a 50p per share dividend on 27 March, taking the year-to-date total to 375p.

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) 9,828.76 1.49%

FTSE 250 (MCX) 22,243.78 0.92%

techMARK (TASX) 5,577.32 0.84%

FTSE 100 - Risers

Phoenix Group Holdings (PHNX) 724.00p 4.02%

HSBC Holdings (HSBA) 1,153.00p 3.71%

Anglo American (AAL) 2,927.00p 3.14%

Fresnillo (FRES) 3,004.00p 2.74%

United Utilities Group (UU.) 1,204.50p 2.69%

Glencore (GLEN) 383.25p 2.67%

BP (BP.) 433.35p 2.57%

Barratt Redrow (BTRW) 370.90p 2.54%

St James's Place (STJ) 1,386.50p 2.48%

National Grid (NG.) 1,149.00p 2.45%

FTSE 100 - Fallers

Bunzl (BNZL) 2,142.00p -3.51%

Burberry Group (BRBY) 1,280.00p -1.35%

WPP (WPP) 329.60p -1.29%

Associated British Foods (ABF) 2,095.00p -1.09%

Halma (HLMA) 3,514.00p -1.01%

InterContinental Hotels Group (IHG) 10,305.00p -0.67%

Croda International (CRDA) 2,744.00p -0.65%

JD Sports Fashion (JD.) 82.70p -0.58%

CRH (CDI) (CRH) 9,440.00p -0.51%

Experian (EXPN) 3,374.00p -0.41%

FTSE 250 - Risers

IntegraFin Holding (IHP) 362.00p 7.10%

Serco Group (SRP) 265.80p 5.39%

International Personal Finance (IPF) 217.00p 4.83%

SSP Group (SSPG) 196.40p 3.48%

CMC Markets (CMCX) 292.50p 2.81%

Hochschild Mining (HOC) 479.20p 2.70%

Harbour Energy (HBR) 209.80p 2.64%

Travis Perkins (TPK) 635.00p 2.58%

Bytes Technology Group (BYIT) 351.00p 2.57%

Hammerson (HMSO) 316.20p 2.53%

FTSE 250 - Fallers

Ceres Power Holdings (CWR) 225.60p -3.67%

Oxford Nanopore Technologies (ONT) 123.70p -1.51%

Wizz Air Holdings (WIZZ) 1,231.00p -1.36%

VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 451.00p -1.10%

WH Smith (SMWH) 657.00p -1.05%

RHI Magnesita N.V. (DI) (RHIM) 2,650.00p -0.93%

Pantheon Infrastructure (PINT) 108.00p -0.92%

Elementis (ELM) 164.80p -0.84%

Domino's Pizza Group (DOM) 172.80p -0.75%

GCP Infrastructure Investments Ltd (GCP) 71.30p -0.56%