London midday: Stocks maintain gains amid rate cut hopes

(Sharecast News) - London stocks were still higher by midday 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. The FTSE 100 was up 0.7% at 8,262.50.

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."

Russ Mould, investment director at AJ Bell, said: "A surprise pullback in the rate of inflation has given joy to investors.

"It strengthens the argument for the Bank of England to continue cutting interest rates and that's fired up shares in housebuilders in the hope that mortgage rates will go down and more people will be able to afford to get onto the housing ladder. Banking shares jumped on the prospect of more demand in the mortgage market.

"The inflation reading has also helped to lower bond yields, with the 10-year gilt easing back a little to 4.841%, which will be welcomed with open arms by the under-fire chancellor, Rachel Reeves. However, the prospect of higher costs for companies this year still threatens to drive up inflation if they decide to raise prices, which means people's living standards won't suddenly improve because of today's inflation reading."

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

Unite Group gained after an initiation at 'buy' by Goldman Sachs, which cited strong fundamentals and an attractive valuation entry point.

Marketing and support services group DCC was 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 advanced 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, miner Anglo American was knocked lower by a downgrade to 'underperform' at RBC Capital Markets.

Watches of Switzerland was weaker after a downgrade to 'hold' from 'buy' at Deutsche Bank.

Market Movers

FTSE 100 (UKX) 8,262.50 0.74% FTSE 250 (MCX) 20,053.23 1.45% techMARK (TASX) 4,589.28 1.47%

FTSE 100 - Risers

Taylor Wimpey (TW.) 113.50p 4.03% Persimmon (PSN) 1,157.00p 3.86% Diploma (DPLM) 4,236.00p 3.77% Lloyds Banking Group (LLOY) 55.52p 3.54% Barratt Redrow (BTRW) 416.80p 3.48% St James's Place (STJ) 857.50p 3.44% Land Securities Group (LAND) 549.50p 3.19% Berkeley Group Holdings (The) (BKG) 3,570.00p 3.12% Unite Group (UTG) 812.00p 3.05% Severn Trent (SVT) 2,407.00p 2.95%

FTSE 100 - Fallers

Anglo American (AAL) 2,436.00p -1.46% Rentokil Initial (RTO) 372.80p -1.25% Imperial Brands (IMB) 2,570.00p -0.96% Melrose Industries (MRO) 556.00p -0.68% Flutter Entertainment (DI) (FLTR) 21,360.00p -0.51% Reckitt Benckiser Group (RKT) 4,843.00p -0.41% Rightmove (RMV) 624.40p -0.38% WPP (WPP) 724.00p -0.36% Antofagasta (ANTO) 1,683.50p -0.33% Unilever (ULVR) 4,467.00p -0.29%

FTSE 250 - Risers

Genus (GNS) 1,698.00p 19.24% Currys (CURY) 91.25p 11.28% Vistry Group (VTY) 563.50p 9.52% Ashmore Group (ASHM) 155.30p 5.72% Just Group (JUST) 151.80p 4.98% Workspace Group (WKP) 454.00p 4.97% Mitchells & Butlers (MAB) 239.00p 4.82% Bellway (BWY) 2,300.00p 4.64% Telecom Plus (TEP) 1,706.00p 4.15% Grafton Group Ut (CDI) (GFTU) 884.90p 4.01%

FTSE 250 - Fallers

Oxford Nanopore Technologies (ONT) 136.20p -3.68% Watches of Switzerland Group (WOSG) 456.60p -3.06% Aston Martin Lagonda Global Holdings (AML) 99.10p -2.08% North Atlantic Smaller Companies Inv Trust (NAS) 3,600.00p -1.10% Edinburgh Worldwide Inv Trust (EWI) 193.80p -1.02% Vietnam Enterprise Investments (DI) (VEIL) 591.00p -1.01% Endeavour Mining (EDV) 1,499.00p -0.93% Energean (ENOG) 1,039.00p -0.48% Scottish American Inv Company (SAIN) 495.00p -0.30% Asia Dragon Trust (DGN) 417.00p -0.24%