Pound bounces to year-high versus dollar after inflation holds at 2%
The FTSE 100 finished 22.56 points, or 0.28% higher to end the day at 8,187.46.
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Your support makes all the difference.The pound and London stocks both climbed higher after inflation was hotter-than-expected last month.
On Wednesday, the pound lifted to its highest against the dollar for a year after the Office for National Statistics (ONS) said Consumer Prices Index (CPI) inflation stayed at 2% in June.
It was above the 1.9% predicted by economists, while service sector inflation remained particularly high for the month, at 5.7%, due to surging hotel prices.
Sticky inflation in the service sector caused increased doubts among economists that the Bank of England will cut interest rates next month, providing a boost to sterling.
UK investors are digesting the impact of the King’s Speech, which has boosted expectations of a more vibrant British economy
The pound was up 0.26% at 1.300 US dollars and was up 0.01% at 1.190 euros.
London’s top stocks started the day in the red but improved through the session after the new Government’s first King’s Speech and gains for Shell and BP due to the recovery in oil prices.
The FTSE 100 finished 22.56 points, or 0.28% higher to end the day at 8,187.46.
Chris Beauchamp, chief market analyst at IG, said: “Hopes of an August rate cut have dimmed, and while this initially put the FTSE 100 on the back foot this morning, the index has managed to get back into positive territory.
“UK investors are digesting the impact of the King’s Speech, which has boosted expectations of a more vibrant British economy.”
Across the Channel, sentiment was slightly more cautious after inflation in the eurozone crept lower to 2.5%.
The Cac 40 in France ended 0.12% lower and the Dax index was down 0.4% at the close.
In the US, the Dow Jones moved higher, but more tentatively than in prior sessions amid weakness in tech stocks.
In company news, shares in banking giant HSBC were slightly higher after it revealed that Georges Elhedery will take over as its next chief executive.
Mr Elhedery, who is currently the firm’s chief finance officer, will take on the role after Noel Quinn retired from the top job in April.
Shares in the company moved 0.4% higher to 666.7p after the announcement.
Elsewhere, consumer goods giant Reckitt Benckiser was higher at the close despite cautioning over a hit to sales of Mead Johnson baby formula powder after a warehouse in America was struck by a tornado.
The Nurofen-to-Dettol maker said its third party warehouse in Mount Vernon, Indiana, suffered “significant damage” from the tornado last week.
Shares still finished up 1.9% at 4,359p despite the warning.
Meanwhile, Babcock shares dropped by 3.9% to 517.5p after the defence firm cut its profit guidance due to a £90 million loss on a Royal Navy contract.
Elsewhere, the price of a barrel of Brent crude oil was up by 1.3% to 82.44 US dollars as markets were closing in London.
The biggest risers on the FTSE 100 were Burberry, up 31p to 735.6p, Smith & Nephew, up 26.5p to 1,089p, BT, up 3.25p to 140.9p, Severn Trent, up 47p to 2,520p, and Reckitt, up 81p to 4,359p.
The biggest fallers on the FTSE 100 were Antofagasta, down 130p to 1,998p, Intermediate Capital, down 104p to 2,106p, Melrose Industries, down 19.4p to 567p, Scottish Mortgage Investment Trust, down 28.6p to 864.6p, and Frasers, down 22.5p to 821.5p.