London Stocks Surge Amid Bets of BoE Rate Cut

London stocks continued their upward trend on Wednesday, bolstered by soft consumer prices data that strengthened expectations of a Bank of England interest rate cut. The FTSE 100 and FTSE 250 indices hit a two-week high, with homebuilders leading gains. However, industrial metal miners lagged due to weak Chinese lending data.

London stocks ended higher after advancing for a fourth straight session on Wednesday, driven by soft consumer prices data for July that raised expectations of a Bank of England interest rate cut in its next policy meeting.

The blue-chip FTSE 100 and the midcap FTSE 250 indices climbed 0.6% and 1%, respectively, reaching a two-week high. Most sectors closed with gains, notably rate-sensitive sectors like homebuilders, which surged 3.4% and were among the biggest gainers.

Meanwhile, industrial metal miners slipped nearly 1% as base metals remained under pressure following a bigger-than-expected drop in Chinese lending, worsening market sentiment. British consumer price inflation climbed for the first time this year in July according to official figures, although the rise was smaller than anticipated, with services prices - closely watched by the Bank of England - rising less rapidly.

Money markets have increased their bets on the BoE implementing a rate cut next month, with the likelihood of a 25-basis-point cut rising to 40% from 36% on Tuesday. "Today's numbers should do nothing to dissuade the BoE from continuing on a rate-cutting path," said Steve Sosnick, chief strategist at Interactive Brokers.

Across the Atlantic, U.S. consumer prices saw a moderate rise last month, while the annual increase in inflation slowed to below 3% for the first time since early 2021, raising the odds of a U.S. rate cut in September. "The Fed will do whatever is necessary to keep the economy progressing steadily while continuing to show progress on inflation," Sosnick noted.

In individual stocks, Flutter surged around 10.5%, marking its best day in eight months, as the world's largest online betting company raised its full-year outlook following a strong second quarter. Playtech jumped 13.7%, topping the mid-cap index, after Flutter entered talks to buy the gambling technology firm's Italian unit Snaitech.

(With inputs from agencies.)