UK Inflation Drop Sparks Stock Market Surge

British equities rose, with the midcap index increasing significantly after inflation slowed unexpectedly in December. Analysts predict the Bank of England may continue easing interest rates. Notably, utilities and homebuilders gained. Currys' stock soared following a positive profit forecast.

On Wednesday, British equities experienced a significant surge, with the midcap index climbing over 1%. This upturn followed the release of data revealing an unexpected slowdown in inflation during December, and a sharper drop in core price growth.

The FTSE 100 blue-chip index increased by 0.7% by 0842 GMT, surpassing its European counterparts, while the FTSE 250 midcap index rose by 1.5%. Inflation rates fell to 2.5% in December from 2.6% in November, with core inflation dropping to 3.2% from 3.5%.

Deutsche Bank's chief UK economist, Sanjay Raja, suggested that the Bank of England is likely to maintain its easing cycle in February as rate cut expectations ease. Bond yields also retreated from multi-decade highs. Gains were noted particularly among utilities and homebuilders, with companies like Currys seeing substantial stock increases.