UK shares opened higher on Wednesday, thanks to softer-than-expected domestic inflation data, which has raised hopes for an early interest rate cut from the Bank of England. As of 0807 GMT, the blue-chip FTSE 100 index was up 0.5%, while the midcap FTSE 250 added 0.3%, after falling nearly 1.5% in the previous session.
According to the data, British consumer price inflation remained unchanged at an annual rate of 4.0% in January, providing a boost for the Bank of England. Economists had expected an increase to 4.2%. The sterling weakened against the dollar after the data, last down 0.2%, leading to the strengthening of equities on the exporter-heavy FTSE 100.
Following the data, expectations of an interest rate cut increased, with money markets expecting around 70 basis points of interest rate cuts this year, up from about 58 bps previously. The rate-sensitive homebuilders’ index was among the top sectoral performers, rising 1.6%.
In corporate updates, Coca-Cola HBC jumped 4.4% to lead the blue-chip index, after the bottler said it expects profit to grow in 2024 and reported upbeat annual profit.