MARKET REPORT: FTSE 100 holds on to gains after inflation cools off

The FTSE 100 has clocked up its best weekly performance since March after better-than-expected UK inflation data fuelled hopes that interest rate hikes will not rise as far as had been feared.

On a day of modest gains, the blue-chip index was up 0.2 per cent, or 17.68 points, to 7663.73.

It meant the FTSE 100 has risen 2.84 per cent this week, a feat not achieved since the last week of March when it gained 3.06 per cent.

The rally came after official data on Wednesday showed inflation fell more sharply than expected from 8.7 per cent in May to 7.9 per cent in June. That sparked hopes that the Bank of England could opt for a smaller rate rise next month.

London’s second tier ended the week in the red, as the FTSE 250 dipped 0.6 per cent, or 111.28 points, to 19,200.45. But the mid-cap index has gained 4.01 per cent this week to record its best performance since the end of October last year when it rose 4.13 per cent.

Boost: The FTSE 100 has risen 2.84 per cent this week, a feat not achieved since the last week of March when it gained 3.06 per cent

Richard Hunter, head of markets at Interactive Investor, said traders had responded to ‘potentially improving conditions in the UK’.

But he also pointed to further tests next week when UK banks begin reporting half-year results that will provide more clues about the outlook.

There was also a fillip for oil prices after pledges from China to boost car and electronics sales with the goal of reviving sluggish demand in the world’s second biggest economy. A barrel of Brent crude was up by 1.5 per cent to more than $80 a barrel.

That helped BP rise 0.8 per cent, or 3.55p, to 475.8p while Shell added 0.9 per cent, or 22.5p, to 2418p.

Elsewhere, there was further pain for AMTE Power at the end of a difficult week.

Sky News reported that the Government has rejected calls from the Scottish battery cell maker to step in and provide the necessary funding it requires.

It came as AMTE this week warned that it could fall into administration and have its shares suspended from trading on AIM unless fresh funds were raised.

Its shares fell by 14.3 per cent, or 0.62p, to 3.75p.

Babcock marched on – up 4.4 per cent, or 15.8p, to 377.4p – a day after the defence group issued an upbeat outlook and announced that it will reinstate a dividend.

It was a positive end to the week for Hargreaves Lansdown after broker Jefferies raised its rating on the stock to ‘buy’ from ‘underperform’ and hiked the target price to 1015p from 800p.

The investment platform on Wednesday said new customers invested £1.7bn in the three months to the end of June – 6 per cent higher than the previous quarter.

Shares rose 1.9 per cent, or 17p, to 927p. Glencore became the latest heavyweight miner to update the market following results from Antofagasta and Rio Tinto earlier in the week.

But only the group’s cobalt and gold output increased in the six months to the end of June while copper, coal and zinc production was down.

Glencore has pinned its hopes on an improved second half and reiterated its full-year forecasts.

Shares inched up 0.01 per cent, or 0.05p, to 472.55p.

Bus and train operator First Group proposed a fresh share buyback programme of up to £115m as it looked to return cash to investors.

The company has so far handed out £70.9m of the £75m repurchase scheme it launched in December last year.

It also said that trading in the new financial year, which started on March 26, was in line with forecasts despite ongoing industrial action by workers.

The company’s shares added 3.1 per cent, or 4.5p, to 149.8p.