European shares close at new record high
The pan-European Stoxx 600 gained 1.23% to 628.95, Germany’s DAX added 1.16% to 25,287.32, France’s CAC 40 rose 0.81% to 8,429.03 and the FTSE 100 jumped 1.23% to 10,686.18
European shares closed at a new record high on Wednesday, led by defence stocks and buoyed by a sharper-than-expected cooling in UK inflation that strengthened expectations for a near-term interest rate cut.
The pan-European Stoxx 600 gained 1.23% to 628.95, while Germany’s DAX added 1.16% to 25,287.32, France’s CAC 40 rose 0.81% to 8,429.03 and the FTSE 100 jumped 1.23% to 10,686.18.
Weaker UK inflation and strong results from star performers in the defence and mining sector have propelled the FTSE 100 to yet more new highs, said Chris Beauchamp, Chief Market Analyst at IG.
It is a firm risk-on day for global markets anyway, which seem to be unfazed by the continued military buildup in the Middle East, he said.
Yesterday’s sharp reversal in the VIX has heralded a revival of bullish momentum across the board, but it looks like the inevitable dip buying in tech stocks has finally begun, he added.
Patrick Munnelly, market strategy partner at TickMill, added that the FTSE 100 reached a new high on Wednesday, buoyed by a slowdown in domestic inflation, heightening anticipation of a potential interest rate cut as early as March.
Defence stocks also rallied, driven by impressive results from BAE Systems, he said.
In economic news, data from the Office for National Statistics showed UK consumer price inflation slowed to 3% in January from 3.4% in December, marking the lowest annual rate since March 2025 and in line with expectations.
Core inflation, which strips out energy, food, alcohol and tobacco, edged down to 3.1% from 3.2%, the lowest since September 2021.
The softer inflation print, coupled with recent labour market weakness, increased expectations of a policy easing.
January’s slowdown in inflation, alongside cooling labour market conditions, increases the likelihood that the Monetary Policy Committee will cut rates again over the next couple of months, commented Martin Sartorius, lead economist at the Confederation of British Industry.