London's FTSE 100 closed Wednesday trading 0.14% in the green as early support from softer-than-expected UK inflation data gave way to caution ahead of the US Federal Reserve's policy decision later in the day.
"[The Federal Open Market Committee] expected to keep the policy rate at 3.5-3.75% in June and remove the easing bias from its statement," BofA Global Research said.
At home, Britain's annual inflation rate remained stable at 2.8% for the second consecutive month in May, according to data from the Office for National Statistics, below expectations for a rise to 3%. Monthly consumer prices were 0.2% higher, against the 0.7% uptick in April and the market forecast of 0.4% growth.
The data reinforced expectations that the Bank of England may not need to tighten policy further, Berenberg said. "The pass-through from the rise in energy prices to consumer prices appears more limited than the central bank expected. Meanwhile, US-Iran deal has shifted the oil futures curve down such that it now lines up with the most benign of the BoE's 30 April scenarios. This will allow the BoE to refocus on the deceleration in wage inflation that risks it missing its inflation target to the downside in the second half of 2027. We continue to forecast a 25 [basis-point] cut in December and two more in 1H 2027."
In corporate news, Barclays (BARC.L), up 3.40%, was one of the top stocks on the blue-chip index after BofA Global Research raised its price objective on the back of higher profit expectations, noting that the current operating environment is shaping up to be better than the British banking group's medium-term plan assumptions.
"We think recent developments in the operating environment, namely (i) higher swap rates, (ii) strong UK lending growth, (iii) active capital markets, particularly in the US, and (iv) strong consumer trends in the US, should benefit Barclays given its business mix," analysts said. "This not only presents upside potential to earnings, but the higher capital generation could also support higher buybacks, which at current valuations of c.1.1x P/TBV26e, remain attractive."
Experian (EXPN.L) subsidiary Experian Finance US priced a $1 billion issue of 5.35% bonds due Aug. 24, 2036. The British data and technology company will use the net proceeds for general corporate purposes and to repay loans. Shares were flat at close.
In geopolitical news, G7 leaders welcomed the interim US-Iran agreement and pledged support for its implementation, while also calling for a ceasefire in Lebanon. The group said it would accelerate the diversification of energy supply routes and increase energy stockpiles to reduce vulnerability to disruptions in the Strait of Hormuz.