UK Stock Market Surges as Inflation Declines Significantly

The UK's main stock indexes rose after inflation fell more than expected, encouraging a potential rate cut by the Bank of England. Precious metal miners and real estate sectors saw gains, while non-life insurers dropped amid market reviews. The pound's decline further benefited equities.

The UK's major stock indexes experienced a substantial boost on Wednesday. This came after data revealed that British inflation fell more than anticipated, strengthening the case for a possible rate cut by the Bank of England. By 0719 GMT, the blue-chip FTSE 100 had risen by 0.7%, with the mid-cap FTSE 250 gaining 0.3%. Both indexes reached their highest levels in over a week.

Leading the sectoral gains were precious metal miners, which rose 2.1%, in line with gold prices that saw an increase of 0.2%. Additionally, the rate-sensitive real estate sector ticked up by 1.3%. Consumer price index statistics showed a larger-than-expected decline in British inflation to an annual rate of 1.7% in September, down from 2.2% in August. Many had anticipated a decrease to 1.9%. Concurrently, the pound fell 0.6% against the dollar, acting as a further positive factor for British equities.

Current investor sentiments suggest about an 81% chance that the Bank of England will implement a rate cut at its next meeting on November 7. Aaron Hussein from J.P. Morgan Asset Management stated that the recent inflation figures offer reassurance to the Monetary Policy Committee in its inflation battle. However, some investors may be disappointed if the Bank does not align with international peers' pace. Meanwhile, non-life insurers experienced a 1.7% decline after a Financial Conduct Authority review of the premium finance market raised concerns over consumer fairness. Quilter gained 5.7% following a report of increased third-quarter assets under management, whereas Burberry fell by 4.1%, impacting the personal goods sector after an LVMH peer reported a 3% sales decline.

(With inputs from agencies.)