FTSE 100 close: London markets rise strongly after June inflation comes in lower than expected
London markets breathed a sigh of relief on Wednesday after inflation finally came in lower than expected.
The bluechip FTSE 100 closed 1.8 per cent higher at 7,588.20 while the midcap FTSE 250 index, which is more aligned with the health of the domestic economy, ended 3.8 per cent higher at 19,322.52.
Investors were buoyed by this morning’s inflation figures, which showed that the rate of price growth fell to 7.9 per cent in June, down from 8.7 per cent in May.
June’s figure was the lowest since March 2022 when inflation was seven per cent. Last month’s figure also reverses a long trend of inflation topping the Bank’s and City analysts’ projections.
Danni Hewson, AJ Bell head of financial analysis, commented: “Finally, some good news on the inflation front as the headline number dropped below 8 per cent for the first time since March 2022.
“Falling prices at the pump, which have caused such controversy of late, were one of the biggest contributors to the larger than expected fall in inflation, and whilst food prices are still going up they’re not going up quite as fast as they were,” Hewson said.
Housebuilders saw the biggest gain on the FTSE with Persimmon climbing 8.6 per cent, Barratt Developments seven per cent and Taylor Wimpey 6.9 per cent. They had been hit hard by the prospect of soaring rates denting demand for new homes.
Today’s figures suggest that the Bank of England might not need to hike rates as much as previously expected, easing pressure in the house market. Finalto’s Neil Wilson argued that the “sector was too oversold as the market was too bearish on high the BoE would need to go.”
Elsewhere, Hargreaves Lansdown climbed 8.8 per cent after a solid trading update. In the three months to June, the Bristol-based DIY investing outfit saw £1.7bn in net new business, despite the market more broadly seeing outflows.
A handful of firms fell, the majority of which were natural resources companies such as Glencore, Rio Tinto and Antofagasta.
Rio Tinto, which dropped 0.3 per cent, flagged concerns about a global economic slowdown this morning and reported a series of production issues. Antofagasta also lowered its full year production guidance due to project delays. It ended 1.4 per cent lower.