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UK Equities
Rate expectations help cheer FTSE 100
From the Financial Times of Tue, 16 Dec 2014 11:57:52 GMT
LONDON TRADING SCREEN SHOWS MARKET SLUMP...LON32D:BRITAIN-MARKETS:LONDON,17APR00 - A trading screen at Natwest Stockbrokers shows share prices predominantly in red, indicating a fall in values, April 17. Britain's FTSE 100 index remained at a six-month low in early trading as leading technology and media stocks bore the brunt of a sharp sell-off by private investors. iw/Photo by Ian Waldie REUTERS©Reuters

London’s FTSE 100 rose on Tuesday, moving off losses seen in opening trade after inflation data reached a 12-year low, boosting sentiment on the prospect of an extended period of low interest rates.

The consumer price index fell 0.3 per cent month on month in November, exceeding economists’ forecasts of a flat reading, as supermarket price wars and falling petrol prices held back the cost of living.

There were also further signs that the UK’s soaring house price inflation was easing, giving monetary policy makers at the Bank of England more room to manoeuvre.

Data from the Office for National Statistics showed UK house prices rose 10.4 per cent in the year to October 2014, down from the 12.1 per cent growth in the 12 months to September.

“The marked dip in consumer price inflation will heighten [the] belief that the Bank of England will not be raising interest rates before late-2015 and could very well hold fire until 2016,” said Howard Archer, chief UK and European economist at IHS Global Insight.

Persimmon, the UK’s biggest housebuilder, gained 0.9 per cent to £15.06 amid the hope that the outlook for low borrowing costs would continue.

Banking stocks gained after the results of regulators’ stress tests on the sector’s balance sheets did not contain any unsettling surprises. Barclays rose 0.4 per cent to 226.2p, HSBC climbed 0.6 per cent to 595.8p, Royal Bank of Scotland ticked up 0.2 per cent to 364.3p and Lloyds Banking Group gained 1.4 per cent to 75.4p.

There was also bargain hunting among resource stocks after the sector’s recent prolonged run lower, which helped support the rebound. Tullow Oil rose 2 per cent to 366.1p, and Petrofac was 2.3 per cent higher at 685.3p.

Overall, the FTSE 100 rose 0.7 per cent to 6,226.22, a rebound of 44 points, making up some of the ground it lost during its 1.9 per cent fall over the previous session.

Shares in BT climbed 1.9 per cent to 405.4p after news of its potential £12.5bn offer for EE, which would take the former state monopoly back into the mobile telecoms service market. BT confirmed it was in exclusive talks with Orange and Deutsche Telekom to buy the jointly held unit.

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