London Market Turning In Choppy Session Amid Inflation Surprise and Sector Shifts

Investors navigating UK equities on Wednesday encountered a mixed landscape, as several competing forces shaped trading dynamics. The broader market struggled to find clear direction, with the FTSE 100 benchmark turning in slightly negative performance, dropping 16.33 points to 10,110.45—a modest 0.16% decline from earlier levels that had touched 10,138.93. The tepid market action reflects underlying tensions between positive corporate earnings and disappointment from inflation data.

Inflation Data Delivers Unexpected Shock to Market Sentiment

The morning brought unwelcome news from the Office for National Statistics, which revealed UK consumer prices grew 3.4% year-over-year in December—a jump from November’s 3.2% and exceeding economist forecasts of 3.3%. On a monthly basis, prices climbed 0.4%, reversing November’s 0.2% decline and matching consensus expectations. This inflation acceleration comes at a delicate moment for markets, with ECB President Christine Lagarde set to speak at the Davos Economic Forum later Wednesday, following President Donald Trump’s highly anticipated address to the summit.

The broader price picture shows more nuance: input price inflation softened to 0.8% in December from 1.1% the previous month, while output price inflation remained steady at 3.4%. Monthly input prices declined 0.2% versus a 0.5% gain in November, and output prices held flat after November’s 0.1% increase. These figures suggest underlying cost pressures may be moderating, even as headline inflation surprised to the upside.

Mining Rally Stands Out While Banking Sector Retreats

Despite the mixed macro backdrop, the session revealed stark sectoral divergence. Mining stocks turned in notably strong performance, with Rio Tinto climbing 5% and Endeavour Mining advancing 4.2%. These gains reflected broader investor appetite for commodity-linked equities, potentially buoyed by China-focused recovery hopes and industrial demand expectations. Anglo American Plc gained 3.4%, while Glencore added 3.9%.

The luxury and consumer-focused names also posted respectable gains. Burberry emerged as the FTSE 100’s top performer, surging 5.1% after reporting third-quarter retail like-for-like sales rose 3%—beating market expectations. JD Sports Fashion climbed nearly 4%, despite reporting mixed Christmas trading performance, suggesting investors focused on forward momentum rather than seasonal results. Diageo, Pearson, and Fresnillo each added 2% to 2.75%.

However, banking stocks turned in weak performance, with Lloyds Banking Group, Barclays, and NatWest each declining 1% to 1.5%. Standard Chartered, Admiral Group, and other financials also shed ground. Experian posted the session’s sharpest decline, falling 5% after the credit analytics company kept its fiscal-year expectations unchanged, disappointing those hoping for upside guidance.

Housing Market Turning In Steady Growth Despite Macro Headwinds

Adding to the economic backdrop, ONS data showed UK average house prices grew 2.5% year-over-year in November, following October’s 1.9% increase. This acceleration suggests the UK property market maintains resilience even as interest-rate and inflation concerns weigh on broader sentiment.

The market’s cautious stance reflects investors’ positioning ahead of major central bank communications and geopolitical developments that could reshape monetary policy expectations in coming weeks.