The FTSE 100 made steady progress on Tuesday, boosted by a US-China trade extension and broadly as expected US inflation figures.
The FTSE 100 index closed up 18.10 points, 0.2%, at 9,147.81. The FTSE 250 ended 46.80 points lower, 0.2%, at 21,842.69, while the AIM All-Share finished up 1.06 points, 0.1%, at 759.27.
In Europe, the CAC 40 in Paris rose 0.7%, while the DAX 40 in Frankfurt eased 0.2%.
In New York, the Dow Jones Industrial Average was up 1.0%, the S&P 500 was 0.8% higher, hitting an all-time high, and the Nasdaq Composite advanced 1.0%.
Annual consumer price index inflation in the US was a notch lower than expected, while core CPI was higher than anticipated in July, data published by the US Bureau of Labour Statistics showed.
The country’s annual CPI inflation rate was unchanged at 2.7% in July. This was the same as in June but lower than the FXStreet-cited market consensus of an uptick to 2.8%.
The monthly inflation rate slowed to 0.2% in July from 0.3% in June. The deceleration was as expected.
However, core annual CPI inflation increased to 3.1% in July from 2.9% in June, higher than the expected increase to 3.0%.
Monthly core inflation edged up to 0.3% in July, in line with market consensus, from 0.2% in June.
James Knightley at ING said: “Inflation was broadly in line with expectations as tariffs continue to be largely absorbed within US corporate profit margins. This gives the Fed the room to respond to the weaker jobs backdrop and cut interest rates from September.”
The CME FedWatch tool on Tuesday put a 90% chance of a 25 basis points interest rate cut at the September Federal Reserve meeting compared to 86% on Monday.
The pound jumped to 1.3509 dollars late on Tuesday afternoon in London, compared to 1.3402 dollars at the equities close on Monday. The euro climbed to 1.1682 dollars, higher against 1.1591 dollars. Against the yen, the dollar was trading lower at 147.83 yen compared to 148.09 yen.
Blue chips in London had earlier opened brightly as investors breathed a sigh of relief after a trade truce extension between the US and China.
As part of their May truce, fresh US tariffs targeting China were reduced to 30% and the corresponding level from China was cut to 10%. Those rates will now hold until November – or whenever a deal is agreed before then.
The yield on the US 10-year Treasury was at 4.30%, stretched from 4.28%. The yield on the US 30-year Treasury was 4.89%, widened from 4.84%.
Back in London, investors assessed the latest data on jobs and average earnings.
The Office for National Statistics (ONS) said the rate of unemployment in the three months to June remained at 4.7%, where it also had stood in the three months to May. Compared with the three months to March, however, the unemployment rate picked up from 4.5%.
