The FTSE 100 reversed an early decline to close higher on Tuesday as softer-than-expected US inflation data helped offset concerns over soaring oil prices and renewed Middle East tensions.
London’s blue-chip index gained 31.10 points, or 0.3%, to finish at 10,529.39. The FTSE 250 was broadly flat at 23,406.83, while the AIM All-Share rose 0.6% to 765.58.
US consumer prices fell 0.4% month-on-month in June, significantly more than the 0.1% decline expected, while annual inflation slowed to 3.5% from 4.2% in May. Core inflation, excluding food and energy, eased to 2.6% from 2.9%.
The figures pushed the dollar lower and Treasury yields down as investors reassessed the outlook for US interest rates. The US 10-year Treasury yield eased to 4.56% from 4.60%, while sterling strengthened to US$1.3396.
Oil remained a major focus after Brent crude climbed to around US$84 a barrel from US$79.42 at Monday’s London close. The rise followed further hostilities between the US and Iran, including reported attacks on tankers in the Strait of Hormuz and a third consecutive night of US strikes on Iranian targets.
The higher oil price helped BP gain 2.3% and Shell rise 1.2%. BP also issued a strong second-quarter trading update, with analysts at RBC Capital Markets expecting the company to exceed its net debt reduction target ahead of schedule.
Wall Street was positive following the inflation data, with the S&P 500 up 0.5% and the Nasdaq Composite gaining 1.1%.
Goldman Sachs rose 6.9% and JPMorgan gained 2.4% after both banks beat expectations, while IBM plunged 26% following a profit warning and weaker-than-expected performance in its software and infrastructure businesses.
Back in London, higher metals prices supported mining stocks including Rio Tinto, Glencore and Anglo American.
Pearson fell 6.8% following a JPMorgan downgrade.
On the FTSE 250, Atalaya Mining rose 6.5% after reporting stronger second-quarter copper production, while Ithaca Energy gained 3.1% after raising operating guidance.
Genus climbed 3.7% after forecasting annual adjusted pre-tax profit of £98 million, ahead of market expectations.
Wednesday’s economic calendar includes Chinese GDP, industrial production and retail sales data, a Bank of Canada interest rate decision and the Federal Reserve’s Beige Book. Antofagasta, Rio Tinto and Barratt Redrow are among the UK companies scheduled to issue trading updates.
