After dropping 0.5%, the FTSE 100 index reversed course to close 0.4% higher
London’s FTSE 100 finished higher on Wednesday, aided by gains in miners and consumer staples, with strong profit forecasts from luxury brand Burberry and education group Pearson providing a further fillip to sentiment.
After dropping 0.5%, the blue-chip FTSE 100 index reversed course to close 0.4% higher, with major miners and consumer companies such as Diageo and Unilever among top gainers.
British consumer price inflation rose more than expected to 5.4% in December, official data showed, adding pressure on the Bank of England (BoE) to raise interest rates again next month.
The view that the current high readings are transitory is starting to sound a bit hollow, said Alan Custis, managing director at Lazard Asset Management. We would expect inflation to peak nearer 7% in 2022, which will keep the pressure on the BoE to continue increasing interest rates.
Signs of inflationary pressures and labour market strength drove investors to ramp up rate hike bets, pushing the UK’s benchmark bond yield to its highest since March 2019, while shorter-duration yield hit October 2018 highs.
Meanwhile, BoE Governor Andrew Bailey said that he was concerned inflation pressures might prove longer-lasting than previously forecast, citing surging energy costs and signs that cost pressures are feeding into wage demands.
Burberry added 6.3% after the luxury brand said its annual profit would beat market expectations as the company’s full-price sales accelerated in the third quarter.
Pearson added 4.4% after it raised its forecast for full-year adjusted operating profit in a boost to management efforts to restructure the business.
Meanwhile, Unilever PLC added 4.5% after the soap maker said on Wednesday it would not increase its £50 billion ($68 billion) proposal to buy GSK’s consumer healthcare business.