16th Sep 2026 17:11
(Alliance News) - Stocks in London rallied on Wednesday despite news of higher inflation, and an expected US rate increase, as oil prices edged lower.
In London, the FTSE 100 index ended up 30.34 points, 0.3%, at 10,688.47. The FTSE 250 advanced 251.46 points, 1.1%, at 24,070.20, and the AIM all-share climbed 5.21 points, 0.7%, to 788.36.
The Cboe UK 100 ended up 0.4% at 1,063.61, the Cboe UK 250 ended up 1.3% at 20,904.60, and the Cboe small companies was 0.4% higher at 18,539.61.
Brent oil was quoted at USD104.54 a barrel in London on Wednesday, down from USD108.48 late on Tuesday.
Russ Mould, investment director at AJ Bell, said the oil price fall provided some "much-needed relief" to the market following an intense period that fired up inflation worries.
"The dip in the commodity price might not be enough to steer the Federal Reserve on a different path though. It is widely expected to raise interest rates today, with the first of potentially two or three hikes over the next six months," he added.
The US Federal Reserve announces its interest rate call at 1900 BST, with a quarter-point rate increase widely forecast.
"The decision represents a major policy test for Federal Reserve Chair Kevin Warsh, including his ability to build consensus and manage market expectations around the degree of guidance provided on the interest rate path ahead," said analysts at UBS.
Ahead of the decision, bond yields eased back from recent highs. The yield on the US 10-year Treasury was quoted at 4.97%, narrowed from 5.01%. The yield on the US 30-year Treasury was quoted at 5.34%, trimmed from 5.37%.
In European equities on Wednesday, the CAC 40 in Paris rose 0.6%, while the DAX 40 in Frankfurt added 0.5%.
In New York, the Dow Jones Industrial Average was down slightly at the time of the closing bell in London. The S&P 500 rose 0.5%, and the Nasdaq Composite advanced 0.9%.
Figures in the US showed retail sales increased strongly in August.
The US Census Bureau said retail and food services sales totalled USD773.9 billion in August, rising 1.2% from July and 6.0% from a year earlier. The monthly increase beat the FXStreet-cited consensus of 0.8%.
Retail sales had fallen by a revised 0.5% on-month in July, compared with the previously reported 0.6% decline. For the three months from June through August, sales were 6.0% higher than in the corresponding period a year earlier.
Ksenia Bushmeneva, economist at TD Economics, said retail sales had "roared back to life" in August following a disappointing performance in July.
That said, headwinds are "mounting", the analyst added, pointing to higher mortgage rates and the squeeze on households from higher energy prices.
"This is likely to lead to some moderation in spending growth as we move into next year," Bushmeneva said.
In London, investors digested the latest UK consumer price inflation figures from the Office for National Statistics.
The ONS said consumer price inflation accelerated to 3.1% year-on-year in August from 2.9% in July, in line with market expectations cited by FXStreet.
The increase was driven by higher transport costs, particularly motor fuel, as rising oil prices fed through to consumers.
Core CPI, which excludes energy, food, alcohol and tobacco, rose 2.6% annually in August, unchanged from July and also matching market expectations.
"Bottom line, inflation is on the ascent with an unknown destination. Events in the Middle East continue to add to inflationary pressures," commented Sanjay Raja, Deutsche Bank's chief UK economist.
"For the Bank of England, its job to keep inflation at 2% has become harder. Our own projections point to CPI on course to get close to 4% around the turn of the year. Rates may be restrictive, but the key policy question for the MPC will remain: are they restrictive enough," Raja added.
The Bank of England announces its latest interest rate decision at 1200 BST on Thursday, with a hold thought to be the most likely decision, albeit with a split vote.
Reflecting on the inflation figures, UK Prime Minister Andy Burnham said that he was ready to take "difficult decisions" ahead of the government's coming budget.
While acknowledging that the impact of the Middle East war on inflation was "a challenge", he said the government "won't take risks with people's living standards".
The pound was quoted at USD1.3449 on Wednesday, down from USD1.3485 at the same time on Tuesday. Against the euro, sterling fell to EUR1.1658 from EUR1.1681.
The euro eased to USD1.1537 from USD1.1545. Against the yen, the dollar was trading at JPY155.09, slightly down from JPY155.12.
On the FTSE 100, Barratt Redrow led the risers, up 12%, after reporting mixed full-year results as the housebuilder looks to weather a tough backdrop for the sector.
The Leicestershire, England-based housebuilder reported better-than-expected profit but trimmed its outlook for financial 2027.
Citigroup analyst Ephrem Ravi thinks that while lower financial 2027 volume guidance implies some downside risk to consensus earnings estimates, "strong sales momentum, synergy benefits and the sizeable buyback programme should help offset the earnings downside risk."
Lower bond yields also supported the sector, with Persimmon up 5.8% on the FTSE 100. On the FTSE 250, Bellway, Taylor Wimpey and Vistry rose 7.1%, 5.9% and 5.7% respectively.
Mining stocks rose as metal prices climbed. Fresnillo, Antofagasta and Endeavour Mining advanced 2.2%, 2.7% and 1.6% respectively.
But the weaker oil price saw BP and Shell give back some recent gains, closing down 2.3% and 2.1%.
Gold was quoted at USD4,345.07 an ounce on Wednesday, up from USD4,285.70 on Tuesday.
The biggest risers on the FTSE 100 were Barratt Redrow, up 32.40p at 308.80p, Persimmon, up 63.50p at 1,162.00p, Burberry, up 31.40p at 1,009.00p, SSE, up 68.00p at 2,401.00p and Babcock International Group, up 27.90p at 1,021.50p.
The biggest fallers on the FTSE 100 were St James's Place, down 28.00p at 1,085.00p, BP, down 13.50p at 566.80p, Shell, down 76.00p at 3,576.50p, Metlen Energy & Metals, down 0.96p at 45.74p, and Compass, down 0.48p at 30.91p.
Thursday's local corporate calendar has half-year results from retailer Next, and a trading statement from student accommodation provider Unite.
Thursday's global economic calendar has an interest rate decision in the UK, eurozone CPI data, and US initial jobless claims figures.
By Jeremy Cutler, Alliance News reporter
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