London close: Stocks firmer as US CPI comes in hot
By Josh White
Date: Thursday 11 Sep 2025
(Sharecast News) - London stocks advanced on Thursday as investors weighed a stronger-than-expected US inflation reading and its implications for global interest rate policy.
The FTSE 100 climbed 0.78% to close at 9,297.58, while the more domestically-focused FTSE 250 rose 0.74% to 21,693.75.
"Despite a mixed session on Wall Street last night and a small rise in the Vix volatility index, pockets of Europe and Asia moved higher on Thursday," noted Russ Mould, investment director at AJ Bell.
"The UK's FTSE 100 led the charge in Europe as defence and energy stocks were at the top of investors' buy lists."
In currency markets, sterling strengthened 0.35% on the dollar to last trade at $1.3578, while it was little changed against the euro, slipping 0.03% to €1.1566.
Hotter-than-expected US inflation reading clouds Fed outlook
At the top of the economic agenda was US inflation, which accelerated more than expected in August, adding pressure on the Federal Reserve ahead of next week's policy meeting.
Data from the Bureau of Labor Statistics showed headline consumer prices rose 0.4% on the month, double July's pace, lifting the annual rate to 2.9% from 2.7%.
Shelter costs were the largest contributor, climbing 0.4%, while food prices rose 0.5% and energy gained 0.7%, driven by a 1.9% jump in gasoline.
Core CPI, which strips out food and energy, increased 0.3% for a second month, pushing the annual rate to 3.1%.
The figures followed an unexpected 0.1% decline in August's producer price index, which still rose 2.6% year-on-year.
Markets had already priced in a 25 basis point Fed rate cut, though the hotter CPI print has clouded the outlook.
Labour market data meanwhile painted a softer picture stateside, with new jobless claims surging by 27,000 to 263,000 in the week to 6 September, the highest level since October 2021.
That far exceeded expectations for a drop to 235,000.
Continuing claims held steady at 1.93 million, slightly below forecasts, while the four-week moving average rose to 240,500.
The insured unemployment rate was unchanged at 1.3%.
On home shores, UK house prices fell back in August as demand waned, according to the Royal Institution of Chartered Surveyors.
Its house price balance dropped to -19 from -13 in July, while new buyer enquiries softened to -17 and agreed sales slid to -24.
New vendor instructions turned negative for the first time since June 2024 at -3.
"With buyer demand easing and agreed sales in decline, the housing market is clearly feeling the effects of ongoing uncertainty," said RICS analyst Tarrant Parsons.
He cited concerns over the economic outlook and "questions around the future path of interest rates amid stubbornly high inflation" as weighing on sentiment.
The Bank of England cut rates to 4% in August but is widely expected to hold steady at its 18 September meeting.
On the continent, the European Central Bank left interest rates unchanged, keeping the main refinancing rate at 2.15%, the deposit facility at 2% and the marginal lending rate at 2.4%.
"The [ECB] Governing Council appears satisfied with the inflation outlook, as president Christine Lagarde recently noted that inflation is now back at target," noted Patrick Munnelly, market strategy partner at TickMill.
Eurozone inflation was now at 2%, prompting speculation the ECB's rate-cutting cycle may be ending.
The bank lifted its 2025 growth forecast to 1.2% from 0.9% but trimmed its 2026 projection to 1%, while leaving its 2027 forecast at 1.3%.
"Inflation remains largely at target, and economic indicators such as the manufacturing PMI have managed to make a significant recovery," said Joshua Mahony at Scope Markets, adding that the ECB may now "shift the focus away from further stimulus and towards the resilience of the underlying economy."
Defence firms in the green, Ashtead slips on rating cut
Defence stocks were among the strongest performers in London, with BAE Systems jumping 6.3%, while Babcock International rose 2.73% and Rolls-Royce Holdings added 2.18%.
"Ongoing geopolitical tensions have led investors to have confidence in the defence sector, believing earnings prospects are strong given a fragile backdrop," said Mould.
"BAE Systems' share price has risen by 45% over the past 12 months and up 271% over five years."
Elsewhere, Trainline surged 12.23% after the online ticketing platform said it expected full-year earnings to come in at the top end of guidance, following an 8% jump in interim sales driven by strong UK and European traffic.
"Investors have taken Trainline's trading update to be the 'all aboard!' signal for the shares. News that earnings growth will be at the top end of earlier guidance was the trigger for many people to reappraise the stock and hitch a ride," Mould said.
"The overall tone is upbeat and that's exactly what the market needed to hear to get the share price moving higher again."
The group also announced a £150m share buyback, and said net ticket sales had reached £3.2bn, near the top of expectations.
Playtech climbed 3.91% after saying it was on track to deliver 2025 earnings ahead of expectations following a strong first half.
Compass Group gained 2.76% after Deutsche Bank upgraded the caterer to 'buy' from 'hold', naming it and Premier Inn owner Whitbread - which edged up 0.52% - as its top sector picks.
On the downside, M&G slipped 1.82% as it traded without entitlement to its latest dividend.
Ashtead Group eased 0.52% after Jefferies cut its rating to 'hold' from 'buy', warning that while the shares had rallied on optimism over the US construction outlook, "near-term earnings momentum we think remains muted."
Reporting by Josh White for Sharecast.com.
Market Movers
FTSE 100 (UKX) 9,297.58 0.78%
FTSE 250 (MCX) 21,672.14 0.64%
techMARK (TASX) 5,492.08 0.68%
FTSE 100 - Risers
BAE Systems (BA.) 1,947.50p 6.30%
Compass Group (CPG) 2,610.00p 2.76%
Babcock International Group (BAB) 1,130.00p 2.73%
ICG (ICG) 2,262.00p 2.72%
Rolls-Royce Holdings (RR.) 1,123.50p 2.18%
Imperial Brands (IMB) 3,186.00p 1.98%
GSK (GSK) 1,517.50p 1.98%
CRH (CDI) (CRH) 8,350.00p 1.98%
Diploma (DPLM) 5,540.00p 1.84%
Relx plc (REL) 3,396.00p 1.77%
FTSE 100 - Fallers
M&G (MNG) 253.20p -1.82%
Entain (ENT) 860.00p -1.78%
Experian (EXPN) 3,832.00p -1.62%
Flutter Entertainment (DI) (FLTR) 21,180.00p -1.30%
WPP (WPP) 394.70p -0.95%
SEGRO (SGRO) 613.80p -0.90%
The Sage Group (SGE) 1,079.50p -0.78%
Diageo (DGE) 1,906.00p -0.73%
Spirax Group (SPX) 7,060.00p -0.63%
Auto Trader Group (AUTO) 783.40p -0.61%
FTSE 250 - Risers
Trainline (TRN) 291.80p 12.23%
Avon Technologies (AVON) 2,095.00p 7.99%
Carnival (CCL) 2,164.00p 4.19%
Helios Towers (HTWS) 142.60p 4.09%
Cranswick (CWK) 5,220.00p 3.98%
Playtech (PTEC) 412.00p 3.91%
QinetiQ Group (QQ.) 503.00p 3.46%
Close Brothers Group (CBG) 495.60p 3.34%
Chemring Group (CHG) 562.00p 3.31%
WH Smith (SMWH) 686.00p 3.00%
FTSE 250 - Fallers
SDCL Efficiency Income Trust (SEIT) 55.50p -3.48%
Gamma Communications (GAMA) 986.00p -3.33%
Chrysalis Investments Limited NPV (CHRY) 126.20p -3.22%
Energean (ENOG) 866.00p -3.19%
Computacenter (CCC) 2,250.00p -3.02%
XPS Pensions Group (XPS) 343.50p -2.97%
Burberry Group (BRBY) 1,139.50p -2.81%
W.A.G Payment Solutions (EWG) 106.50p -2.74%
IP Group (IPO) 58.30p -2.67%
Oxford Nanopore Technologies (ONT) 169.70p -2.64%
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