FTSE 100 LIVE: London stocks jump as steady UK inflation spurs interest rate cut bets

The FTSE 100 (^FTSE) jumped while European stocks slipped on Wednesday UK inflation remained unchanged at a lower-than-expected 3.8% in September.

Although inflation is still almost double the Bank of England’s (BoE) 2% target, and has been for 12 consecutive months, it provides a slight reprieve for Threadneedle Street as it faces tough decisions over when to reduce interest rates.

The figure from the Office for National Statistics (ONS) was below the 4% forecast by both the BoE and economists polled by Reuters. It marked no change from the 3.8% readings in August and July.

The core rate of inflation, which strips out volatile food and energy costs, dipped to 3.5% from 3.6% in August.

Financial markets are now betting that the next interest rate cut will come sooner than previously thought. Another reduction is now fully priced in by February, compared with March before the inflation figures were published, according to interest rate futures.

Markets also expect more easing next year than they had previously, pricing in 64 basis points of rate cuts versus 57 bps before the inflation data was released.

London’s benchmark index (^FTSE) was 0.7% higher in early trade Germany's DAX (^GDAXI) dipped 0.1% and the CAC (^FCHI) in Paris headed 0.4% into the red The pan-European STOXX 600 (^STOXX) was down 0.1% Wall Street is set for a positive start as S&P 500 futures (ES=F), Dow futures (YM=F) and Nasdaq futures (NQ=F) were all in the green. The pound was 0.3% lower against the US dollar (GBPUSD=X) at 1.3330

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8 mins ago

LaToya Harding

UK inflation holds unexpectedly at 3.8% in September

UK inflation remained unchanged at a lower-than-expected 3.8% in September, providing a slight reprieve for the Bank of England (BoE) as it faces tough decisions over when to reduce interest rates again.

The figure from the Office for National Statistics (ONS) was below the 4% forecast by both the BoE and economists polled by Reuters. It marked no change from the 3.8% readings in August and July.

The core rate of inflation, which strips out volatile food and energy costs, dipped to 3.5% from 3.6% in August.

The data is crucial for the BoE’s Monetary Policy Committee (MPC), which has been striving to bring inflation closer to its 2% target without derailing economic growth. However, the International Monetary Fund (IMF) recently warned the BoE against lowering rates prematurely, stressing the need to control inflation before easing monetary policy further.

Economists had largely expected the inflation rate to rise to 4%, after holding steady at 3.8% for both August and July. The BoE’s forecast for September had been in line with this expectation, with inflation anticipated to remain at 4% before gradually easing over the next few years. 26 mins ago

LaToya Harding

Asia and US overnight

Stocks in Asia were mixed overnight, with the Nikkei (^N225) flat on the day in Japan as Sanae Takaichi became the new prime minister yesterday after winning a parliamentary vote.

On monetary policy, she said: “I believe the BOJ should retain discretion over the tools of monetary policy”, and that she did not see a need to review the 2013 accord between the Bank of Japan and the government.

Against that backdrop, the yen weakened 0.78% against the US dollar, making it the weakest-performing G10 currency, although has stabilised again this morning.

Meanwhile, the Hang Seng (^HSI) fell 0.9% in Hong Kong and the Shanghai Composite (000001.SS) was 0.1% down by the end of the session.

In South Korea, the Kospi (^KS11) added 1.6% on the day.

Across the pond on Wall Street, the S&P 500 (^GSPC) ended flat, and the tech-heavy Nasdaq (^IXIC) was 0.2% higher. The Dow Jones (^DJI) also gained 0.5%.

It comes as the US government shutdown is entering day 22, which now makes it the second-longest shutdown, behind the 2018-19 shutdown that lasted for 35 days.

Republican Senate Majority Leader John Thune said on Tuesday that Republican lawmakers were “hopeful that this will be the week we break out of this”, but there’s still no obvious sign of a compromise emerging between Republicans and Democrats.

The Polymarket odds for the end of the shutdown continued to drift into the distance, with the chances of the shutdown lasting beyond 16 November up from 29% this time yesterday to 40% now. 51 mins ago

LaToya Harding

Coming up

Good morning, and welcome back to our markets live blog. As usual we will be taking a deep dive into what's moving markets and happening across the global economy.

To the day ahead we have data releases including the UK CPI print for September, whilst central bank speakers include ECB President Lagarde and Vice President de Guindos. Otherwise, earnings releases include Tesla and IBM.

Here's a snapshot of what's on the agenda:

7am: UK trading updates: Barclays, Fresnillo, Heathrow, Reckitt Benckiser, Softcat 9.30am: UK house prices 12pm: US MBA Mortgage applications 1.25pm: ECB president Christine Lagarde speech 3.30pm: US EIA Crude oil stocks change 7pm: Annual City banquet at Mansion House and speeches

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