FTSE 100 Surges on Softer Inflation Expectations and Rate Cut Optimism

The U.K.'s primary equity benchmark delivered a robust performance on Wednesday, climbing 151.06 points to settle at 9,835.85, representing a 1.56% gain. The rally was fueled by inflation data that came in softer than anticipated, strengthening market conviction that the Bank of England will cut rates at tomorrow’s decision.

Inflation Data Drives Market Sentiment

Official statistics released Wednesday morning painted a picture of easing price pressures across the economy. The consumer price index expanded just 3.2% compared to the prior year, falling below both October’s 3.6% reading and the consensus forecast of 3.5%. More striking was the monthly comparison: prices actually declined 0.2% in November, a sharp reversal from October’s 0.4% monthly increase and better than the flat reading markets were bracing for.

The softer inflation picture extended to core price measures, which strip out volatile energy and food components. Core inflation retreated to 3.2% from 3.4%, indicating broad-based moderation in underlying cost pressures.

Selective Stock Movement Reflects Cautious Optimism

Equity rotation was evident across the index. Energy and banking names led the advance, with financial giant HSBC Holdings, miner Anglo American, and precious metals explorer Fresnillo climbing between 3.4% and 4.3%. Phoenix Group Holdings emerged as the session’s strongest performer, surging 4.3% on the rate cut narrative.

Defensive and cyclical sectors showed mixed signals. Industrial names including Glencore, Convatec Group, and Rolls-Royce Holdings advanced 2.3% to 2.7%, while consumer-oriented stocks proved more hesitant. Bunzl declined more than 3% after maintaining cautious full-year guidance, while advertising firm WPP retreated 1.6%. Consumer discretionary plays Associated British Foods and Burberry Group softened 0.6% to 1%.

Utility and infrastructure stocks demonstrated resilience, with National Grid, Severn Trent and SSE posting gains in the 2.3% to 2.7% range. Real estate builder Barratt Redrow similarly climbed 2.6% despite broader economic uncertainty.

The market’s decisive move reflects growing confidence that the central bank will finally begin its rate-cutting cycle, offering relief to rate-sensitive equities after months of elevated borrowing costs.