UK shares close higher on rate hike bets
The blue-chip FTSE 100 index ended 1% higher at 10,432.3 points, while the midcap FTSE 250 jumped 1.2%
UK shares closed higher on Wednesday after a softer-than-expected April inflation reading tempered some interest-rate-hike bets, while a drop in crude oil prices and stabilizing government bond yields also offered some respite.
The blue-chip FTSE 100 index ended 1% higher at 10,432.3 points, while the midcap FTSE 250 jumped 1.2%. Both indexes closed at their highest closing levels in nearly two weeks.
Consumer prices in April increased by an annual rate of 2.8%, compared with March’s figures of 3.3% and expectations of 3.0%.
That prompted some analysts to question the need for rapid rate hikes by the Bank of England, especially following Tuesday’s data that showed the unemployment rate ticking up.
Inflation coming in softer than expected will further take the pressure off the Bank of England to hike rates over the next few meetings. But we are most certainly not out of the woods in terms of the impact of the Iran conflict on inflation, said Luke Bartholomew, deputy chief economist at Aberdeen.
BoE Governor Andrew Bailey said a rise in market interest rates since the start of the Iran war has given the central bank more time to assess the economic effects of the conflict.
Risk sentiment also got a boost worldwide as oil prices dropped after reports that negotiations with Iran were in the final stages, along with other details.
Aerospace and defence stocks added 3.7%, thanks to a 5.3% gain in shares of defence contractor Babcock International Group after Peel Hunt upgraded the stock to “buy” from “add”.
Heavyweight banks jumped 2.8%, with Barclays and Lloyds up more than 3% each.