FTSE 100 Advances Over 0.7% On Surprise Drop In Inflation Rate

U.K. stocks are up firmly in positive territory Wednesday morning, outperforming other major markets in Europe, after data showed an unexpected drop in British consumer price inflation in the month of December.

Investors are now looking ahead to the release of U.S. consumer price inflation data for clues about the Federal Reserve’s possible moves on interest rates.

The benchmark FTSE 100 gained 58.82 points or 0.72%, climbing to 8,260.36.

Vistry Group is rising more than 5.5%. Taylor Wimpey, Persimmon, Barratt Redrow, Diploma, Lloyds Banking, Howden Joinery and Berkeley Group Holdings are gaining 3 to 4%.

Unite Group, Land Securities, Severn Trent, United Utilities, DCC, British Land Company, Marks & Spencer, Kingfisher, Interteck, Fresnillo, Barclays, Vodafone and Standard Chartered are up 2 to 3%.

Rentokil Initial is declining 1.7%. Anglo American Plc and Imperial Brands are down 1.5% and 1.1%, respectively.

Data from the Office for National Statistics showed UK consumer price inflation moderated unexpectedly in December, registering an annual increase of 2.5% in the month, weaker than the 2.6% rise in November. The rate was seen unchanged at 2.6 percent.

Month-on-month, the CPI climbed 0.3%, following a 0.1% rise in November. Prices were expected to gain 0.4%.

Another data from ONS showed that input prices fell for the fifth straight month in December. Input prices dropped 1.55 annually after a 2.1% drop.

On a monthly basis, input prices edged up 0.1% compared to flat growth in November. Likewise, output prices gained 0.1% after November’s 0.4% gain.

A survey of Chief Financial Officers, conducted by the British Retail Consortium, said UK retailers plan to increase prices this year in response to increased National Insurance costs.

Two-thirds of respondents said they will lift prices and around half said they would be reducing number of hours/overtime work, says the survey results.

The impact of the budget on business investment was also clear. About 46% of CFOs said they would ‘reduce capital expenditure’ and 25% said they would ‘delay new store openings.’

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