FTSE 100 closes higher, leading European markets as UK inflation rate cools
LONDON — European equity markets closed broadly higher on Wednesday, with investors positioning ahead of key interest rate decisions from major central banks.
The pan-European Stoxx 600 finished the session marginally above the flatline, with sectors mixed and most major bourses in positive territory.
London's FTSE 100 led regional gains, climbing 0.9%. The advance was fueled by cooler-than-expected inflation data, which showed the U.K. consumer price index slowed to 3.2% in November from 3.6% in October. Financial services and homebuilder stocks rallied on the prospect of an imminent interest rate cut from the Bank of England.
The BOE's Monetary Policy Committee is widely anticipated to lower its benchmark rate by 25 basis points to 3.75% on Thursday, responding to subdued economic growth and a softening labor market. Homebuilder Barratt Redrow surged 3.7%, leading the FTSE 100, while pension firm Phoenix Group gained 3.3%.
The British pound weakened following the inflation report, falling 0.2% against the U.S. dollar and 0.3% against the euro. Yields on U.K. government bonds (gilts) fell across the curve, with the 10-year yield dropping 4 basis points. Despite the decline, the U.K. maintains the highest long-term borrowing costs among G7 nations.
Attention now turns to the European Central Bank, which concludes its final policy meeting of the year on Thursday. While the ECB is expected to hold rates steady at 2%, President Christine Lagarde signaled an upward revision to the euro zone growth forecast. The Riksbank and Norges Bank will also announce their final 2025 policy decisions this week.
In corporate news, spirits giant Diageo announced the sale of its 65% stake in East African Breweries to Japan's Asahi Holdings for approximately $2.3 billion. Its shares closed slightly lower, down 0.2%.
Meanwhile, U.S. stocks traded lower midday, with the S&P 500 poised for a fourth consecutive negative session. Asia-Pacific markets were mixed as investors assessed trade data from Japan.
