London close: Stocks finish firmer ahead of Fed, BoE
By Josh White
Date: Wednesday 18 Jun 2025
(Sharecast News) - London stocks closed slightly higher on Wednesday as investors digested fresh UK inflation figures and awaited the outcome of the US Federal Reserve's latest policy meeting, while geopolitical tensions in the Middle East continued to weigh on sentiment.
The FTSE 100 index rose 0.11% to end the session at 8,843.47 points, as the FTSE 250 climbed 0.25% to 21,290.26 points.
In currency markets, sterling was last up 0.28% on the dollar, trading at $1.3467, while it slipped 0.01% against the euro to change hands at €1.1696.
"It has been a see-saw week for markets, which have rebounded in afternoon trading as we await the Fed decision," said IG chief market analyst Chris Beauchamp.
"Fears of an immediate US strike on Iran have receded, but the redeployment of military assets continues, indicative of preparations for US forces to join Israel's campaign.
"So long as the conflict remains contained then we can expect market reaction to remain similarly muted; how much US participation is now priced in given Trump's rather transparent comments on the subject remains to be seen."
Beauchamp said the Israel-Iran conflict added another situation for the Fed to monitor, and seemed to weigh the table more heavily towards keeping rates steady.
"Given the sheer variability of outcomes this year, it's becoming almost impossible to make a decent estimate of where policy will be come year end, but the market's expectation of a September cut still seems overly-optimistic."
UK inflation holds steady as food prices surge; growth forecast trimmed
In economic news, UK inflation eased marginally in May, but a sharp uptick in food prices underscored persistent cost pressures for households.
The consumer price index (CPI) rose 3.4% year-on-year, slightly down from April's 3.5% and in line with forecasts.
While transport costs helped drag overall inflation lower, the Office for National Statistics (ONS) highlighted food, furniture, and household goods as key drivers of upward pressure.
Food and non-alcoholic beverage prices climbed 4.4% annually, the fastest pace since February last year.
Core inflation, which excludes volatile components such as food and energy, slowed to 3.5% from 3.8% in April, also matching expectations.
Services inflation cooled to 4.7%, down from 5.4% previously.
"A variety of counteracting price movements meant inflation was little changed in May," said ONS acting chief economist Richard Heys.
"Air fares fell this month, compared with a large rise at the same time last year, as the timing of Easter and school holidays affected pricing.
"Meanwhile, motor fuel costs also saw a drop."
In the housing market, annual price growth slowed sharply to 3.5% in April, down from 7% in March, as buyers rushed to complete transactions before changes to stamp duty thresholds.
Average UK house prices now stood at £265,000.
Rental inflation remained elevated, with average UK rents up 7% in the year to May, only slightly lower than April's 7.4% rate.
In England, the average rent had reached £1,394.
"The first few months of 2025 were exceptionally busy, and that sent [house] prices up - but then the inevitable lull kicked in," said Chris Barry, director at property solicitors Thomas Legal.
"The UK will undoubtedly see a few months where the market regathers itself before things potentially start to pick up again in the autumn.
"This morning's inflation data does not help, however, as a rate cut on Thursday is almost certainly now off the table."
The Bank of England is due to announce its latest interest rate decision on Thursday.
Having already cut rates twice this year to 4.25%, most economists were expecting no change this month, though further easing was anticipated later in the year.
Separately, the Confederation of British Industry downgraded its UK growth forecast, citing rising costs and global trade uncertainty.
It said it now expected GDP to expand 1.2% in 2025, down from its December estimate of 1.6%.
The CBI attributed the downgrade to domestic policy changes, including increased employer National Insurance and minimum wage rates, as well as the impact of US trade restrictions.
However, it forecast improving conditions into 2026, with interest rates potentially falling to 3.5% by early that year.
"The unpredictable global outlook, combined with rising employment costs, gloomy business sentiment and subdued investment intentions means it's more important than ever that [the] government pulls all the levers it can to set the UK on a path to sustainable growth," said Louise Hellem, the CBI's chief economist.
"With GDP set to remain modest in 2026, there is an important opportunity for the government to fire up the growth agenda in forthcoming industrial strategy."
Across the Atlantic, jobless claims in the US edged lower last week in line with expectations, with initial claims falling by 5,000 to 245,000.
Despite the dip, the figure remained one of the highest since mid-2023.
Continuing claims stood at 1.94 million, just below the recent peak, while the four-week average rose to 245,500, indicating a gradually softening labour market.
Rathbones and ME Group lead London risers; Tullow Oil slumps
On London's equity markets, Rathbones Group surged 5.54% after Bank of America initiated coverage with a 'buy' rating, describing the investment manager as "highly undervalued" and noting its shares were trading at just 10 times estimated 2026 earnings.
ME Group International climbed 9% after the vending and photobooth operator confirmed it was reviewing strategic options to boost shareholder value, including a potential sale.
While no formal offers had been received, the company's statement followed media speculation over a possible buyout.
Gambling giant Entain rose 1.57% after Deutsche Bank raised its price target on the betting group to 1,122p from 958p, citing improved guidance for its US joint venture BetMGM.
The broker maintained a 'buy' rating.
Airlines also rebounded, with British Airways owner International Consolidated Airlines up 2.2%, Wizz Air 1.8% higher, and easyJet edging up 0.34%, as the sector recovered from recent losses linked to rising oil prices.
Property firm Derwent London gained 2.22% following news of a major lease extension and expansion at its White Collar Factory development in East London.
On the downside, Tullow Oil plummeted 20.37% amid reports that merger discussions with Canadian-listed Meren Energy had fallen through.
Consumer products manufacturer PZ Cussons dropped 6.62% after confirming the sale of its 50% stake in Nigerian joint venture PZ Wilmar and narrowing its full-year profit guidance.
AO World shed 3.57% despite reporting stronger-than-expected annual profits, while Ashtead dipped 1.93% as investors digested results released on Tuesday.
Ocado Group slipped 1.72% after announcing a new automated warehouse project in Catalonia, in partnership with Spanish retailer Bon Preu.
Reporting by Josh White for Sharecast.com.
Market Movers
FTSE 100 (UKX) 8,843.47 0.11%
FTSE 250 (MCX) 21,290.26 0.25%
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FTSE 100 - Risers
Melrose Industries (MRO) 486.20p 2.53%
International Consolidated Airlines Group SA (CDI) (IAG) 319.50p 2.08%
Aviva (AV.) 615.80p 1.85%
Flutter Entertainment (DI) (FLTR) 20,230.00p 1.79%
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British American Tobacco (BATS) 3,662.00p 1.33%
Admiral Group (ADM) 3,372.00p 1.32%
HSBC Holdings (HSBA) 874.70p 1.31%
Unite Group (UTG) 856.00p 1.30%
Phoenix Group Holdings (PHNX) 661.50p 1.30%
FTSE 100 - Fallers
GSK (GSK) 1,449.50p -2.06%
Ashtead Group (AHT) 4,476.00p -1.93%
Compass Group (CPG) 2,497.00p -1.92%
WPP (WPP) 521.60p -1.84%
Croda International (CRDA) 3,051.00p -1.84%
Smurfit Westrock (DI) (SWR) 3,155.00p -1.56%
Convatec Group (CTEC) 281.80p -1.47%
Marks & Spencer Group (MKS) 366.50p -1.32%
Anglo American (AAL) 2,090.00p -1.25%
Berkeley Group Holdings (The) (BKG) 4,160.00p -1.14%
FTSE 250 - Risers
Me Group International (MEGP) 230.00p 9.00%
Rathbones Group (RAT) 1,742.00p 4.81%
Mobico Group (MCG) 26.76p 4.78%
Energean (ENOG) 876.00p 4.47%
Vietnam Enterprise Investments (DI) (VEIL) 590.00p 3.51%
W.A.G Payment Solutions (WPS) 86.60p 2.61%
Workspace Group (WKP) 423.00p 2.55%
Aston Martin Lagonda Global Holdings (AML) 86.75p 2.48%
Trustpilot Group (TRST) 234.20p 2.36%
Derwent London (DLN) 2,024.00p 2.22%
FTSE 250 - Fallers
Ferrexpo (FXPO) 47.20p -3.67%
AO World (AO.) 98.40p -3.57%
Howden Joinery Group (HWDN) 852.50p -2.57%
Pagegroup (PAGE) 260.00p -2.32%
Breedon Group (BREE) 425.80p -2.25%
Raspberry PI Holdings (RPI) 447.60p -2.23%
Ocado Group (OCDO) 239.20p -2.17%
Hochschild Mining (HOC) 245.20p -2.00%
Pets at Home Group (PETS) 261.60p -1.80%
Burberry Group (BRBY) 1,056.00p -1.77%
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