Source: Sharecast
The FTSE 100 was up 0.3% at 9,213.27, reversing earlier small losses.
Data released earlier by the Office for National Statistics showed that consumer price inflation rose at an annual rate of 3.8% in July, mainly due to transport and in particular air fares.
This was up from 3.6% in June, above analysts’ expectations of 3.7% and the highest recorded since January 2024, when it was 4.0%.
Prices in the transport division rose 3.2% in July, up from 1.7% the month before. This reflected a large upward effect from airfares, which jumped 30.2% between June and July, compared with a rise of 13.3% between the same months in 2024.
Food and non-alcoholic beverages prices increased 4.9% in July, up from 4.5% the month before. This was the fourth consecutive rise in the annual rate and the highest recorded since February 2024, but remains well below the peak seen in early 2023.
Inflation in the dominant services sector, which is closely watched by the Bank of England, rose to 5.0% from 4.7%.
The core rate - which strips out energy, food, alcohol and tobacco - rose to 3.8% from 3.7%.
ONS chief economist Grant Fitzner said: "The main driver was a hefty increase in air fares, the largest July rise since collection of air fares changed from quarterly to monthly in 2001.
"This increase was likely due to the timing of this year’s school holidays.
"The price of petrol and diesel also increased this month, compared with a drop this time last year.
"Food price inflation continues to climb, with items such as coffee, fresh orange juice, meat and chocolate seeing the biggest rises."
Danni Hewson, head of financial analysis at AJ Bell, said: "For UK rate setters it’s the hike in service sector inflation which is likely to narrow their opportunity to cut the base rate further this year.
"Looking at market expectation this morning, worries that persistent inflation will continue to influence pay awards despite a cooling labour market makes it increasingly likely we’ve seen the last cut for 2025."
However, ING economist James Smith said a November rate cut is still "more likely than not".
"UK inflation was higher than expected in July, but given it was driven primarily by airfares, the Bank of England won’t be too concerned. A November rate cut hangs in the balance, though it remains our base case," he said.
In equity markets, Convatec surged as the medical products company launched a share buyback programme of up to $300m.
United Utilities gained after an upgrade to ‘overweight’ from ‘equalweight’ by Barclays. Severn Trent was also trading up, along with Pennon, as Barclays hiked its price targets for the stocks and said it sees "better prospects" for the water sector.
Ithaca Energy shot higher after it upgraded full-year production guidance as profits and output doubled in the first six months of the year.
On the downside, housebuilders Berkeley, Persimmon, Taylor Wimpey and Crest Nicholson all fell, as the hotter-than-expected inflation data spelled potentially bad news for mortgages.
Computacenter nudged lower as it promoted its head of group commercial finance Keither Mortimer to the chief financial officer position following a nine-month search.
Lion Finance and OSB Group both slumped after first-half results.
Market Movers
FTSE 100 (UKX) 9,213.27 0.26%
FTSE 250 (MCX) 21,750.76 -0.38%
techMARK (TASX) 5,326.82 -0.05%
FTSE 100 - Risers
Convatec Group (CTEC) 244.00p 5.54%
United Utilities Group (UU.) 1,142.00p 1.92%
Admiral Group (ADM) 3,642.00p 1.45%
British American Tobacco (BATS) 4,296.00p 1.42%
Imperial Brands (IMB) 3,096.00p 1.31%
Severn Trent (SVT) 2,600.00p 1.29%
Unilever (ULVR) 4,602.00p 1.28%
Coca-Cola Europacific Partners (DI) (CCEP) 6,720.00p 1.20%
Intertek Group (ITRK) 4,746.00p 1.19%
Relx plc (REL) 3,579.00p 1.13%
FTSE 100 - Fallers
Flutter Entertainment (DI) (FLTR) 21,350.00p -1.88%
easyJet (EZJ) 509.60p -1.74%
Marks & Spencer Group (MKS) 352.60p -1.67%
Anglo American (AAL) 2,135.00p -1.66%
ICG (ICG) 2,168.00p -1.45%
Berkeley Group Holdings (The) (BKG) 3,676.00p -1.39%
Taylor Wimpey (TW.) 99.50p -1.24%
Persimmon (PSN) 1,116.00p -1.24%
Rolls-Royce Holdings (RR.) 1,046.50p -1.23%
International Consolidated Airlines Group SA (CDI) (IAG) 389.20p -1.19%
FTSE 250 - Risers
Ithaca Energy (ITH) 194.70p 9.26%
W.A.G Payment Solutions (WPS) 88.80p 4.72%
Dr. Martens (DOCS) 86.45p 2.37%
Investec (INVP) 541.50p 2.07%
Pennon Group (PNN) 480.20p 1.65%
Close Brothers Group (CBG) 493.20p 1.61%
Workspace Group (WKP) 412.50p 1.48%
Ocado Group (OCDO) 359.00p 0.98%
Savills (SVS) 941.00p 0.97%
Chemring Group (CHG) 533.00p 0.95%
FTSE 250 - Fallers
Lion Finance Group (BGEO) 7,395.00p -3.21%
Crest Nicholson Holdings (CRST) 170.70p -3.18%
Kier Group (KIE) 201.50p -2.89%
Senior (SNR) 193.00p -2.23%
Me Group International (MEGP) 203.50p -2.16%
Gamma Communications (GAMA) 1,078.00p -2.00%
Aston Martin Lagonda Global Holdings (AML) 76.55p -1.92%
Bridgepoint Group (Reg S) (BPT) 339.60p -1.91%
XPS Pensions Group (XPS) 361.50p -1.90%
Polar Capital Technology Trust (PCT) 394.00p -1.87%