On Tuesday, the UK stock indices experienced gains, driven by positive earnings reports and signs of diminishing inflationary pressures. The FTSE 100, which is heavily influenced by international companies, rose by 0.6% by 14:00 GMT, while the more domestically-focused FTSE 250 saw a 0.2% increase. Both indices approached three-week highs, reflecting the optimism in the market.
Leading the advances was advertising giant WPP, which surged 4.6% and briefly topped the FTSE 100. The company announced that its 2023 operating profit margin is expected to reach the upper limit of its previous forecasts, igniting investor confidence and driving the stock's upward trajectory.
The British Retail Consortium reported that shop prices in January saw the slowest yearly increase since May 2022. This data contributes to the evidence of waning inflationary pressures, just ahead of the Bank of England's (BoE) policy announcement later this week.
Market expectations suggest that the BoE will maintain interest rates steady on Thursday. However, predictions are divided over whether the central bank will begin reducing borrowing costs in the next quarter or during the July-September period, according to a recent Reuters survey. Investors will closely monitor the central bank's commentary following the meeting for any potential shifts in messaging.
Neil Wilson, Chief Markets Analyst at Markets.com, highlighted that the focus will be on the BoE officials' post-meeting commentary, stating, "The Bank of England is expected to keep rates on hold, but investors are watching for a change in messaging from the Monetary Policy Committee."
The positive sentiment in the UK stock market was also influenced by the record closing of New York's S&P 500 index on Monday. This has set a favorable tone as investors anticipate major corporate earnings, economic reports, and the Federal Reserve policy meeting scheduled for later this week.
Among the top movers in the FTSE 100, SSP Group saw a 3.1% increase after reporting a sales increase of over 14% in its first quarter. Rolls-Royce shares climbed by 1.9%, while 3i Group enjoyed a 2.18% gain after Barclays raised its price target on the stock by 14% to 2,810p.
In contrast, Diageo experienced a slump of 3.4% on Monday, the sharpest fall in the FTSE 100, due to falling short of first-half sales expectations, particularly in Latin America. However, on Tuesday, the stock showed signs of recovery, trading up 1.53% at 2,885.00p.
Deliveroo faced a decline of 5.3% following the disposal of its 4.5% share by German-based Delivery Hero through an accelerated bookbuild offering. Deliveroo shares on the London Stock Exchange were trading at 119.60p, down 1.89% at the time of writing.
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