Equities jumped for joy yesterday with the FTSE posting its strongest performance in eight months after better-than-expected UK inflation news.
The FTSE 100 climbed to 7,588 points, up 1.8% yesterday, as shares rallied on the back of the promising data.
The slowing in the inflation rate provided a welcome boost to the market and a touch of balm for mortgage borrowers alike.
Tide turning
Although at 7.9 % the Consumer Price Index inflation rate is still almost quadruple the Bank of England’s target, the inflationary tide is turning faster than expected.
Susannah Streeter, head of money and markets, Hargreaves Lansdown, said that the big gainers on the equity market were housebuilders, retailers and banks, while the expectation that borrowing costs won’t be pushed up quite as much as forecast have given a leg up to companies in sectors which are very sensitive to higher interest rates.
She said: “Sentiment surrounding housebuilders has been hinging on the direction of inflation and interest rates, and concerns that affordability is being sideswiped as mortgages become much more expensive, so any signs that homeowners might show more resilience is being welcomed.
She added: “Consumer discretionary stocks are also among the gainers, with JD Sports on the front foot, in the expectation that shoppers might still splash out on a new pair of trainers if mortgage outgoings or rents don’t rise quite so high as had been forecast.”
Sterling also fell back against the euro and the dollar as traders assessed that the Bank of England won’t have to raise rates as far and as fast as feared.
Green shoots
There were green shoots of hope for homeowners as well and the average rate of new fixed mortgages also fell for the first time in months by 0.02%.
