London open: FTSE rallies as inflation data raises rate cut expectations

(Sharecast News) - London stocks rallied in early trade on Wednesday as the latest UK inflation data raised rate cut expectations. At 0855 BST, the FTSE 100 was up 0.7% at 9,488.68.

Figures released earlier by the Office for National Statistics showed the rate of inflation was unchanged in September, after a jump in airfares was offset by lower prices elsewhere.

The cost of food and drink also fell for the first time since May 2024.

The consumer prices index rose by 3.8% in the 12 months to September 2025, unchanged on August.

The rate remains above the Bank of England's long-term target of 2%. However, it was also better than expected, with most analysts forecasting an increase to 4%.

Core inflation, which strips out the most volatile elements of energy, food, alcohol and tobacco, rose 3.5%, down from August's 3.6%.

Grant Fitzner, chief economist at the ONS, said: "The largest upward drivers came from petrol prices and airfares, where the fall in prices eased in comparison to last year.

"These were offset by lower prices for a range of recreational and cultural purchase, including live events. The cost of food and non-alcoholic drinks also fell."

Food and non-alcoholic drink prices, which have soared in recent months, rose by 4.5%, down on August's 5.1% spike.

The print will provide some relief for chancellor Rachel Reeves, who is due to present her Budget next month.

Hal Cook, senior investment analyst at Hargreaves Lansdown, said the inflation data has added to a view already popular with investors in recent weeks that the Bank of England might end up cutting interest rates more than previously expected over the next 12 months or so.

"As a result, investors demand for UK government bonds (gilts) has remained strong, causing yields to fall further," he said. "The inflation data comes on top of UK unemployment creeping up over recent months, hitting 4.8% in August (the latest data available).

"The yield on the 10-year gilts has fallen to around 4.42% today (their lowest level since December 2024), having been as high as 4.75% as recently as 9 October, reflecting investors' expectations of rate cuts increasing. Swaps markets are now pricing in a 60% probability of a rate cut ahead of year end, up from 40% yesterday. The Monetary Policy Committee next meet on 6 November to discuss interest rates.

"We think the market has overreacted this morning: inflation at 3.8% is still nearly double the Bank of England target and Andrew Bailey has been clear that future rate cuts will be made in a considered fashion and data driven. He hasn't appeared to be in a rush to cut so far.

"There is also a risk that the upcoming Budget towards the end of November could change things. It's therefore unclear whether the Bank of England will look to cut at their next meeting or wait to see what comes out of the Budget before cutting further - remember that they have already cut rates three times in 2025, taking them from 4.75% at the start of the year to 4% today. While a cut in November is more likely after this latest inflation data, it's by no means guaranteed."

In equity markets, precious metals miner Fresnillo and gold miners Endeavour and Hochschild were among the best performers as the price of the yellow metal stabilised following heavy losses in the previous session.

Aarin Chiekrie, equity analyst at Hargreaves Lansdown, noted that gold prices fell 5% on Tuesday: "The downward pressure came from traders locking in gains from the recent record-breaking rallies and hopes of easing US-China tensions dented gold's safe-haven appeal. Still, gold remains up around 60% year-to-date," he said.

Fresnillo was also in focus as it reiterated its full-year production guidance after trading in line with expectations in the third quarter, but said gold output was trending towards the upper end of its target range.

Barclays Bank gained as it launched an unexpected £500m share buyback, lifted its return on equity target and unveiled a plan to move to quarterly share buyback announcements.

The bank posted a 7% fall in third quarter profit to £2bn, partly due to a higher £235m provision relating to the UK motor finance scandal, taking the total impairment to £325m.

Softcat advanced as it reported a jump in full-year profit and revenue, pointing to a strong performance in the base business.

On the downside, consumer goods giant Reckitt nudged lower it reiterated its full-year guidance as it reported a "strong" third-quarter performance, with like-for-like net revenue up 7% in the three months ended 30 September at £3.61bn.

ITV tanked after its largest shareholder, Liberty Global, sold half its stake in the broadcaster in a placing, raising about £135m.

Market Movers

FTSE 100 (UKX) 9,488.68 0.65% FTSE 250 (MCX) 22,023.11 0.52% techMARK (TASX) 5,538.87 0.16%

FTSE 100 - Risers

Fresnillo (FRES) 2,216.00p 4.82% Rio Tinto (RIO) 5,269.00p 3.37% Barclays (BARC) 375.15p 2.99% Babcock International Group (BAB) 1,202.00p 2.56% International Consolidated Airlines Group SA (CDI) (IAG) 403.40p 2.44% Persimmon (PSN) 1,206.00p 2.29% Berkeley Group Holdings (The) (BKG) 4,110.00p 2.09% Barratt Redrow (BTRW) 394.10p 1.99% Phoenix Group Holdings (PHNX) 666.50p 1.99% DCC (CDI) (DCC) 4,820.00p 1.90%

FTSE 100 - Fallers

Beazley (BEZ) 882.50p -0.95% Bunzl (BNZL) 2,440.00p -0.89% Spirax Group (SPX) 6,870.00p -0.79% Diploma (DPLM) 5,385.00p -0.74% Hiscox Limited (DI) (HSX) 1,348.00p -0.66% Burberry Group (BRBY) 1,248.50p -0.64% Experian (EXPN) 3,526.00p -0.62% Coca-Cola HBC AG (CDI) (CCH) 3,488.00p -0.51% Pearson (PSON) 1,106.00p -0.45% Unilever (ULVR) 4,617.00p -0.41%

FTSE 250 - Risers

Playtech (PTEC) 279.50p 4.88% Endeavour Mining (EDV) 3,192.00p 4.04% Quilter (QLT) 176.80p 2.85% Chemring Group (CHG) 570.00p 2.70% Energean (ENOG) 915.00p 2.69% Pantheon Infrastructure (PINT) 106.50p 2.40% Ibstock (IBST) 130.60p 2.35% Harbour Energy (HBR) 204.00p 2.20% Big Yellow Group (BYG) 1,200.00p 2.04% Pennon Group (PNN) 527.50p 2.03%

FTSE 250 - Fallers

ITV (ITV) 67.55p -9.39% International Personal Finance (IPF) 202.00p -5.39% Oxford Biomedica (OXB) 560.00p -2.44% Hays (HAS) 57.80p -1.87% W.A.G Payment Solutions (EWG) 93.60p -1.47% Pagegroup (PAGE) 237.60p -1.41% Ocado Group (OCDO) 247.10p -1.36% Renishaw (RSW) 3,635.00p -1.09% JPMorgan Japanese Inv Trust (JFJ) 700.00p -0.99% 4Imprint Group (FOUR) 3,090.00p -0.96%