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FTSE jumps as pound slumps on surprise inflation fall

FTSE jumps as pound slumps on surprise inflation fall

 

A surprise fall in inflation has sent the pound falling, as investors reviewed their bets on the Bank of England raising interest rates.

Consumer prices inflation fell to a one-year low of 2.5% in March, down from 2.7% in February. Investors had expected inflation to hold at the 2.7% level.

The retail prices index, which includes the impact of mortgage costs, fell from 3.6% in February to 3.3% in March.

The pound fell 0.7% against the dollar on the news to $1.419, while the euro rose 0.7% versus sterling to 87.1p.

The pound's fall helped lift the FTSE 100, whose stocks rely on overseas markets for around three-quarters of their earnings. The index was up 52 points, or 0.7%, to 7,278 on the news. 

While investors are still pricing in an interest rate hike by the Bank of England in May, the surprise fall in inflation has led some to reassess the prospects of a further rise in November.

'The latest UK inflation data is unlikely to get in the way of a May rate hike, but a further deceleration in the core consumer prices index over coming months could prove to be a headache for policymakers later in the year,' said James Smith, economist at ING.

'A May rate hike still looks like an increasingly done deal, but what comes thereafter is less clear,' he said.

'Policymakers have appeared to talk up the prospects of a second rate hike later in the year, so a November move certainly shouldn't be ruled out. But Brexit still has the potential to get quite noisy around the time of October's European Union summit, while the economy is still struggling to get up to speed.'

On the FTSE 100, miners led the way. Risers included:

  • Glencore (GLEN) +3.3% at 359p;
  • Rio Tinto (RIO) +3.1% at £38.92;
  • Anglo American (AAL) +2.6% at £17.43;
  • BHP Billiton (BLT) +2.4% at £14.82;
  • Antofagasta (ANTO) +2% at 965.2p.

On the FTSE 250, Hammerson (HMSO) rose 3.1% to 509p as the property company withdrew its recommendation shareholders support a takeover of rival Intu Properties (INTUP).

Among 'small-cap' stocks, Dignity (DTY) surged 16.6% to £10.87 as the funeral services firm reported first quarter earnings 'significantly' ahead of expectations.

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Profile: Kevin Doran's formula for success at AJ Bell

Profile: Kevin Doran's formula for success at AJ Bell

From a degree in theoretical physics to teaching and becoming one of the youngest chief investment officers in the UK, Kevin Doran has certainly had an interesting career.

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