© Reuters. FILE PHOTO: The London Stock Exchange Group offices are seen in the City of London, Britain, December 29, 2017. REUTERS/Toby Melville/File Photo
By Shristi Achar A
(Reuters) – UK shares moved higher on Wednesday as a softer-than-expected domestic inflation data fuelled investor hopes for an early interest rate cut by the Bank of England.
The blue-chip and the midcap added 0.5% each, as of 0912 GMT.
Data showed British consumer price inflation unexpectedly held steady at an annual rate of 4.0% in January, unchanged from December, sparking expectations that it could encourage the BoE to start cutting borrowing costs from their 16-year high.
Economists polled by Reuters had anticipated an increase to 4.2%.
The sterling weakened against the dollar after the data, strengthening equities on the exporter-heavy FTSE 100. The currency was last down nearly 0.3%.
Yield on the British 10-year government bond also fell, holding at 4.083%. [GB/][GBP/]
“Last year we had just about the highest inflation rate of any of the developed countries. But this year it is going to see the biggest improvement and the figure that we’ve seen for January confirms that,” said Andrew Bell, chief executive officer of Witan Investment Trust (LON:).
Money markets expect around 68 basis points of interest rate cuts this year from the BoE, up from about 58 bps before the data. [0#BOEWATCH].
The rate-sensitive homebuilders index gained 2.3%, leading the sectoral advancers.
The data comes after hotter-than-expected U.S. inflation and stronger domestic labour market had forced investors to temper their rate cut bets, pulling UK stocks lower on Tuesday.
Base and precious metal miners were the laggards, down around 1% each, tracking weaker gold and prices against the dollar. [GOL/] [MET/L]
Anglo American (JO:) shares fell 3.5%, adding to miners’ losses after Citigroup cut its price target.
Among corporate updates, Coca-Cola (NYSE:) HBC jumped 5.5% to lead the blue-chip index after the bottler said it expects profit to grow in 2024 and reported upbeat annual profit.
Dunelm (LON:) Group lost 1.6% after the home furnishing retailer flagged slower pace of margin growth in second half of the year as it manages the impact of Red Sea-related shipping disruptions.
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