London open: Stocks jump as inflation unexpectedly falls in December

(Sharecast News) - London stocks jumped in early trade on Wednesday as data showed that UK inflation unexpectedly eased in December after two months of increases, underpinning expectations of a rate cut in February. At 0835 GMT, the FTSE 100 was up 0.7% at 8,257.79.

Figures released earlier by the Office for National Statistics showed that consumer price inflation rose 2.5%, down from 2.6% in November, and versus expectations for it to remain unchanged.

Meanwhile, core inflation - which excludes food and energy - declined to 3.2% from 3.5%, versus expectations for a smaller drop to 3.4%.

Services inflation eased to 4.4% in December from 5% the month before. Economists were expecting 4.8%.

ONS economist Grant Fitzner said: "Inflation eased very slightly as hotel prices dipped this month, but rose a year ago. The cost of tobacco was another downward driver, as prices increased by less than this time last year.

"This was partly offset by the cost of fuel and also second-hand cars, which saw their first annual growth since July 2023."

Danni Hewson, head of financial analysis at AJ Bell, said: "After the ill winds which have buffeted UK financial markets over the past couple of weeks, today's inflation figures will undoubtedly provide some welcome respite.

"Whilst at 2.5% inflation is still stubbornly above the Bank of England's target, the fact headline CPI has come in below expectation and has even fallen a bit is cause for a degree of celebration. Markets have immediately seized on the numbers which will be the last inflation snapshot MPC members will get before they make their decision on whether to deliver an interest rate cut in February.

"From just 60% predicting a cut at the next meeting, expectation since the ONS figures were released has shot up to over 80% according to Refinitiv data and there is growing optimism that more cuts could be on the cards for 2025 than had been anticipated. A significant cooling in service sector inflation will have boosted the odds as central bankers have been rightly concerned about the impact of pay increases on this crucial cog in the UK's economic wheel.

"But it's important not to over egg this pudding and not to forget the potential for another inflation spike if businesses do pass on those extra costs coming their way in April as they have warned they will have to.

"There's also the potential that global trade friction resulting from US tariffs could keep things volatile for the foreseeable future. And whilst rate cuts would be welcome, one of the reasons they're likely to be considered is because of the weakness which seems embedded in the UK economy.

"The chancellor might have let out a sigh of relief this morning but she's not off the hook yet and will need to follow through on the promise to properly lay out her growth plans if she's going to win over markets."

In equity markets, rate-sensitive housebuilders were on the rise, with Taylor Wimpey, Persimmon, Barratt Redrow and Berkeley Group among the top performers on the FTSE 100.

Unite Group was the standout gainer on the top-flight index, however, after an initiation at 'buy' by Goldman Sachs.

DCC was also in the black after an upgrade to 'outperform' at RBC Capital Markets.

Diploma rallied as the distribution group hailed a "strong" first quarter, in line with expectations.

Animal genetics firm Genus surged as it said it expects full-year adjusted pre-tax profit to be at the top end of the range of market forecasts after a strong first half. Consensus expectations are for a range of between £63m and £67.4m.

Currys was in the black as the electricals retailer raised full-year profit guidance after reporting a strong performance over Christmas and Black Friday, with a 2% rise in UK underlying sales as consumers bought more laptops and mobile phones.

Recruitment firm Hays rose despite saying it expects interim pre-exceptional operating profit of £25m, towards the lower end of the consensus range amid subdued trading conditions as net fees fell 12% in the second quarter.

Pub group Mitchells & Butlers, housebuilder Vistry, asset manager Ashmore and Just Group all gained after trading updates.

On the downside, miners Anglo American and Antofagasta were both knocked lower by downgrades to 'underperform' at RBC Capital Markets.

Market Movers

FTSE 100 (UKX) 8,257.79 0.69% FTSE 250 (MCX) 20,051.87 1.44% techMARK (TASX) 4,579.74 1.26%

FTSE 100 - Risers

Unite Group (UTG) 814.50p 3.36% DCC (CDI) (DCC) 5,210.00p 3.27% Diploma (DPLM) 4,212.00p 3.18% Taylor Wimpey (TW.) 112.55p 3.16% Persimmon (PSN) 1,149.00p 3.14% Lloyds Banking Group (LLOY) 55.30p 3.13% Barratt Redrow (BTRW) 415.40p 3.13% Berkeley Group Holdings (The) (BKG) 3,570.00p 3.12% United Utilities Group (UU.) 966.60p 3.09% Land Securities Group (LAND) 548.00p 2.91%

FTSE 100 - Fallers

Anglo American (AAL) 2,442.00p -1.21% Antofagasta (ANTO) 1,675.50p -0.80% Flutter Entertainment (DI) (FLTR) 21,370.00p -0.47% International Consolidated Airlines Group SA (CDI) (IAG) 308.10p -0.42% Rolls-Royce Holdings (RR.) 564.80p -0.28% London Stock Exchange Group (LSEG) 11,575.00p -0.26% Pearson (PSON) 1,287.50p -0.19% Scottish Mortgage Inv Trust (SMT) 988.60p -0.16% Hikma Pharmaceuticals (HIK) 2,000.00p -0.10% CRH (CDI) (CRH) 7,572.00p -0.08%

FTSE 250 - Risers

Genus (GNS) 1,628.00p 14.33% Currys (CURY) 92.00p 12.20% Mitchells & Butlers (MAB) 240.00p 5.26% Vistry Group (VTY) 538.50p 4.66% AO World (AO.) 100.00p 4.38% Bellway (BWY) 2,292.00p 4.28% Ashmore Group (ASHM) 153.00p 4.15% Pennon Group (PNN) 515.00p 4.00% Just Group (JUST) 150.00p 3.73% Ocado Group (OCDO) 306.20p 3.55%

FTSE 250 - Fallers

Watches of Switzerland Group (WOSG) 462.60p -1.78% JPMorgan Global Growth & Income (JGGI) 587.00p -0.34% Vietnam Enterprise Investments (DI) (VEIL) 595.00p -0.34% XPS Pensions Group (XPS) 321.00p -0.31% Allianz Technology Trust (ATT) 414.50p -0.24% Personal Assets Trust (PNL) 500.00p -0.20% Ruffer Investment Company Ltd Red PTG Pref Shares (RICA) 267.00p -0.19% BlackRock Greater Europe Inv Trust (BRGE) 558.00p -0.18% Pacific Horizon Inv Trust (PHI) 578.00p -0.17% Raspberry PI Holdings (RPI) 578.50p -0.17%