FTSE swings higher on hopes of cooling inflation | CPT PPP Coverage

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London’s markets recovered ground amid growing hopes across the continent that central banks will pause recent interest rate hikes.

In the City, the broad improvement in sentiment helped to lift the energy and commodity sectors, although London-listed water and utilities firms dropped in value amid concerns over a planned class action lawsuit against Severn Trent for allegedly under-reporting sewage spills.

The FTSE 100 moved 0.8%, or 59.88 points, higher to finish at 7,587.3.

Across the Channel, Europe’s banks had a stronger session after the Italian government partially backtracked on windfall tax plans announced earlier this week, confirming new caps within the policy.

Germany’s Dax index was 0.49% higher for the day and the Cac 40 closed up 0.72%.

Michael Hewson, chief market analyst at CMC Markets UK, said: “European markets have been in a much more ebullient mood today despite further economic data from China that points to a weakening economy, after headline CPI (Consumer Price Index inflation) fell into deflationary territory for the first time since early 2020.

“This comes across as encouraging for inflation trends in Europe, as well as the US, in that it could prompt the end to further rate hikes from central banks here.

“We’ve also seen a modest rebound in the European banking sector after the Italian government clarified the details around its windfall tax bombshell from Tuesday.”

In the US, stocks opened higher as they took positive cues from Europe but soon drifted lower amid caution ahead of key US inflation figures later this week.

Meanwhile, sterling had a weak session after the Niesr think tank presented a bleak outlook for the economy, predicting that UK GDP would take another year to recover to pre-pandemic levels.

The pound was down 0.23% to 1.271 US dollars and was 0.37% lower at 1.158 euros at market close in London.

In company news, gambling firm Flutter Entertainment dipped in value after a slight slowdown in revenue growth over the latest quarter.

The share fall came despite the company behind Paddy Power swinging from a pre-tax loss of £112 million last year to a £128 million profit in the first six months of 2023. Shares were 510p lower at 14,395p.

Hiscox dropped after the insurance firm missed analyst guidance for its retail business.

The firm forecast mid-single digit growth for its retail operation for the financial year, which they said compared with a previous outlook of around 10%.

As a result, shares in the company finished down 67p at 1,046p.

Shares in infrastructure construction firm Hill & Smith rose by 110p to 1,680p after it told investors it expects to surpass profit forecasts amid a boost from the US.

The price of oil nudged higher amid another escalation in tensions between Russia and Ukraine.

A barrel of Brent crude oil rose by 0.97% to 87.01 US dollars at the time markets were closing in London.

The biggest risers in the FTSE 100 were BP, up 12.65p at 492.65p, IHG, up 144p at 5,934p, Shell, up 56.5p at 2,428.5p, Glencore, up 10.5p at 455.1p, and Haleon, up 5.8p at 328.65p.

The biggest fallers of the day were Hiscox, down 67p at 1,046p, Flutter, down 510p at 14,395p, Severn Trent, down 84p at 2,391p, RS Group, down 18p at 754p, and United Utilities, down 18p at 956.8p.