London markets shrug off near 30-year high inflation print

London markets shrugged off an alarming near 30-year high inflation print yesterday, held higher by mining stocks surging.

The capital’s premier FTSE 100 index closed up 0.35 per cent at 7,589.66 points, while the domestically-focused FTSE 250 index, which is more aligned to the health of the UK economy, added 0.01 per cent to reach 22,655.02 points.

Figures published by the Office for National Statistics showed UK inflation is running at a near 30-year high, scaling to 5.4 per cent last month, up from 5.1 per cent in November.

Fears that the world’s top central banks will launch a rapid rate hike cycle this year to dampen inflation has weighed heavily on London markets in recent days.

Some experts in the City expect the Bank of England to hike interest rates four times this year, taking borrowing cost to 1.25 per cent, the highest level since February 2009.

Markets tend to struggle when rates rise as it improves the attractiveness of fixed income assets and knocks equity valuations.

Investors have been pricing in high inflation for a while now, meaning today’s print did not shock markets.

Russ Mould, investment director at AJ Bell, said: “While UK inflation has hit a 30-year high at 5.4 per cent, this is only marginally ahead of expectations, and certainly shouldn’t shock the markets. Indeed, the FTSE 100 and FTSE 250 indices barely budged on the news.”

Miners led the day’s gains on the FTSE 100, with the Polymetal the best performer, surging 7.59 per cent, followed closely by Fresnillo, closing up 4.9 per cent

Publisher Pearson was among the top stocks, climbing 4.36 per cent after it hiked profit forecasts.

The pound gained ground on the dollar, strengthening 0.21 per cent to buy $1.3622.