London stocks ended modestly higher on Wednesday, with the FTSE 100 recovering from early losses despite stronger-than-expected UK inflation, as gains in European equities and upbeat US technology earnings helped support investor sentiment.
The FTSE 100 rose 19.88 points, or 0.2%, to close at 10,752.88, while the FTSE 250 gained 0.3% to 24,439.78 and the AIM All-Share edged higher to 763.12.
The blue-chip index initially struggled after official figures showed UK annual consumer price inflation accelerated to 3.5% in September from 3.1% in August, exceeding market expectations of 3.4%.
The increase was largely driven by higher transport costs, particularly petrol and diesel, while core inflation rose to 2.8% from 2.6% and services inflation increased to 3.7% from 3.4%.
The figures strengthened expectations that the Bank of England will raise interest rates at its November meeting, particularly following recent evidence of stronger economic growth and a more resilient labour market.
RBC Capital Markets economist Cathal Kennedy said the inflation figures had effectively removed the remaining obstacles to a November rate increase, warning that higher household energy bills could push inflation further upwards.
Peel Hunt Chief Economist Kallum Pickering also revised his forecast, now expecting a quarter-point rate increase in November rather than interest rates remaining unchanged.
Investors also assessed higher-than-expected public borrowing figures ahead of Chancellor John Healey’s Budget on 28 October, adding to concerns over government finances and future taxation.
Sterling strengthened to $1.3389 against the dollar, compared with $1.3376 on Tuesday, while rising to €1.1930 against the euro.
European markets performed strongly, with France’s CAC 40 gaining 1.1% and Germany’s DAX climbing 1.4%.
In Paris, eyewear group EssilorLuxottica surged 16% following better-than-expected third-quarter revenue, while supermarket operator Carrefour plunged 13% after lowering its outlook amid disruption caused by social unrest in France.
Carrefour warned that protests, curfews and temporary store closures were affecting customer footfall and trading conditions.
The weakness also affected London-listed companies exposed to France, with Kingfisher falling 0.9% and investment group 3i declining 3.9%.
On Wall Street, technology stocks attracted renewed interest following stronger-than-expected quarterly results from SpaceX, which jumped 9.7%, while Tesla gained 3.5%.
Elon Musk also confirmed that SpaceX and Tesla are examining a potential merger, adding to investor interest ahead of Tesla’s earnings announcement.
The Nasdaq Composite climbed 0.9%, while the S&P 500 advanced 0.4% and the Dow Jones Industrial Average edged 0.2% higher around London’s close.
Investors are now awaiting further technology earnings from Tesla, Meta Platforms, SAP and Texas Instruments, with particular attention on artificial intelligence investment and future profitability.
Back in London, Ithaca Energy gained 1% after the UK Government approved development of the Jackdaw gas field, raising hopes that the separate Rosebank oil project could also receive regulatory clearance.
Prime Minister Andy Burnham described the Jackdaw decision as a pragmatic approach to strengthening domestic energy supplies while maintaining the Government’s longer-term clean energy commitments.
Brent crude climbed to $109.14 a barrel, compared with $106.65 on Tuesday, as renewed tensions around the Strait of Hormuz raised concerns over global oil supplies.
Reports of tankers striking naval mines in the strategically important shipping route added to uncertainty surrounding energy transportation and international fuel prices.
Among mid-cap stocks, recruitment firms Michael Page and Hays surged 8.4% and 5.7% respectively, benefiting from positive sentiment following strong results from European recruitment group Randstad.
However, Halfords fell 8.6% after its trading update suggested weaker performance during the second half of the financial year.
Mobico jumped 33% after receiving a possible cash takeover proposal valued at 46 pence per share from Autobuses de León.
The National Express owner’s independent directors indicated that they would be minded to recommend an offer on those terms, although a formal transaction has not yet been completed.
Elsewhere, Computacenter, Experian, Convatec and BP were among the FTSE 100’s strongest performers, while Aberdeen, Burberry, Fresnillo and Antofagasta finished lower.
Gold edged higher to $4,139.04 an ounce, while US Treasury yields remained relatively stable.
The FTSE 100’s positive finish reflects resilience among UK equities despite renewed inflation pressures, with stronger technology earnings and improving European market sentiment helping offset concerns over borrowing costs and fiscal policy.
Attention now turns to Thursday’s results from Barclays and J Sainsbury, alongside trading updates from London Stock Exchange Group, Rentokil Initial, InterContinental Hotels Group and RELX.
Further economic releases, including US jobless claims and UK consumer confidence figures, could also influence sentiment as investors prepare for the Bank of England’s November interest rate decision.
