London stocks open higher on surprise CPI data

Rate-sensitive homebuilder stocks jumped 4.2%, leading sectoral gains. M&G gained 3.3% after the insurer posted a better- than-expected 31% rise in its first-half operating profit. Mid-cap stocks soared 1.4%, boosted by a 3.8% rise in Dunelm Group Plc after the homeware retailer said it expected higher sales volumes to drive earnings in 2024.

UK stocks rose on Wednesday after data showed a surprise fall in inflation in August, raising hopes that the Bank of England (BoE) was nearing the end of its interest rate hiking cycle.

The exporter-heavy FTSE 100 rose 0.6% by 0705 GMT, while the sterling weakened 0.4% against the U.S. dollar, hitting its lowest levels since May. Britain's annual consumer price inflation (CPI) unexpectedly fell to 6.7% last month from 6.8% in July, data showed, while economists polled by Reuters had forecast CPI would rise to 7.0%.

Money markets are betting on a 53% chance for the BoE to raise interest rates by 25 basis points to 5.5% on Thursday, which many economists think could be the last in the central bank's tightening cycle. Rate-sensitive homebuilder stocks jumped 4.2%, leading sectoral gains.

M&G gained 3.3% after the insurer posted a better- than-expected 31% rise in its first-half operating profit. Mid-cap stocks soared 1.4%, boosted by a 3.8% rise in Dunelm Group Plc after the homeware retailer said it expected higher sales volumes to drive earnings in 2024.