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Late market roundup: US inflation, deal with China lift London shares

Stocks in London ended higher on Wednesday, supported by UK Chancellor Rachel Reeves’s spending review and softer US inflation, as markets welcomed signs of economic resilience and trade optimism.

‘Our deal with China is done,’ US President Donald Trump wrote on Truth Social on Wednesday, adding that the agreement was still ‘subject to final approval with President Xi [Jinping] and me.’

He further stated that China will supply ‘full magnets, and any necessary rare earths... up front’, and that Washington will allow Chinese students to remain at US colleges.

The FTSE 100 index closed up 11.27 points, 0.1%, at 8,864.35. The FTSE 250 ended up 39.08 points, 0.2%, at 21,428.54, and the AIM All-Share closed up 2.51 points, 0.3%, at 768.83.

The Cboe UK 100 was up 0.1% at 884.13, the Cboe UK 250 was up 0.2% at 18,945.73, and the Cboe Small Companies was up 0.5% at 16,999.19.

Most notably in UK news, UK Chancellor Rachel Reeves set out the government’s spending review in the House of Commons.

The chancellor said total departmental budgets would grow by 2.3% a year in real terms and promised a ‘record cash investment’ in the NHS, amounting to an extra £29 billion a year. She also claimed the government’s tax hikes and looser borrowing rules allowed her to spend £190 billion more on the day-to-day running of public services and £113 billion on investment.

The review marks a watershed moment for the government, almost a year after Labour’s election landslide, PA reports.

The chancellor said her ‘driving purpose’ was ‘to make working people, in all parts of our country, better off’ as she promised cash to rebuild schools and hospitals, confirmed funding for nuclear power schemes and major transport projects across the country.

‘We are renewing Britain,’ she said. ‘But I know that too many people in too many parts of our country are yet to feel it.’

Nonetheless, XTB analyst Kathleen Brooks commented that ‘a debate is now raging about how [Reeves] can fulfil her spending commitments without causing the national debt to swell, and UK borrowing levels to surge’.

Adding that Reeves ‘was saved by US inflation’ (the latest figures for which were released on Wednesday afternoon - see below), Brooks said: ‘Overall, this budget is squeezing day-to-day public spending and is focusing on capital investment. Even the NHS’s budget increase is linked to big tech projects rather than day to day spending on the public’s health. Thus, there could be a focus on limiting public sector pay going forward, due to the inflationary impact and the fact that the money is not available.

‘As always, it is worth interrogating any government promises and this is where the numbers announced by the Chancellor today may not stand up to scrutiny.

‘For example, most of Reeves’ spending pledges encompass the period from 2023/24 to 2028/29, the full parliamentary period,’ Brooks continued. ‘We are already one year into Labour’s term, so some of the spending ’increases’, that she has announced, have already been spent.’

On the FTSE 100, BT was up 2.5%, following the Telegraph’s report on Tuesday that it is in the ‘early stages’ of mulling a bid for broadband provider TalkTalk.

Weir Group was up 1.5%.

The Glasgow, Scotland-based engineering company has been awarded a £40 million sustainable tailings solution contract in Chile. It will supply its tailings transport solution for Codelco, the world’s largest copper producer, at the Talabre tailings dam expansion project in the Atacama region.

On the FTSE 250, Ibstock dropped 15% after a ‘disappointing’ update.

The Leicestershire, England-based building products supplier said it expects adjusted Ebitda for 2025 to be between £77 million and £82 million. The upper estimate, Peel Hunt noted, would be below consensus of £92 million.

‘This update is disappointing, especially on pricing, but the group remains well placed to rebound when the wider building market starts picking up,’ Peel analysts said.

Among small caps, Ricardo surged 26%.

The Shoreham-by-Sea, England-based environmental and engineering consultancy has agreed to a £281 million all-cash buyout from Canadian consultancy WSP Global Inc, the two companies announced.

The 430 pence per share offer is at a 28% premium to Ricardo’s 335p closing price on Tuesday.

The offer also has the backing of Ricardo shareholder Science Group, which has a 21.8% total stake and has agreed to sell 12.4 million shares to WSP at the offer price.

In European equities on Wednesday, the CAC 40 in Paris closed down 0.4%, while the DAX 40 in Frankfurt ended down 11.45 points.

The pound was quoted higher at $1.3545 at the time of the London equities close on Wednesday, compared to $1.3509 on Tuesday. The euro stood at $1.1486, against $1.1418. Against the yen, the dollar was trading at JP¥144.63, down compared to JP¥144.93.

Stocks in New York were higher. The Dow Jones Industrial Average was up 0.4%, while the S&P 500 index and the Nasdaq Composite were up 0.2%.

Regarding this week’s trade policy discussions, US Treasury Secretary Scott Bessent has said it is possible to rebalance economic relations with China if Beijing proved a ‘reliable partner in trade negotiations’.

‘If China will course-correct by upholding its end of the initial trade agreement we outlined in Geneva, and I believe after our talks in London they will, then the rebalancing of the world’s two largest economies is possible,’ Bessent told lawmakers at the House Ways & Means Committee.

Also in the US, consumer price inflation cooled modestly in May, as falling energy prices offset continued increases in housing and food costs, data from the Bureau of Labor Statistics showed.

The consumer price index for all urban consumers rose 0.1% month-on-month in May, following a 0.2% rise in April. On an annual basis, prices rose 2.4%, up slightly from 2.3% in April and below the FXStreet-cited consensus of 2.5%.

Shelter was the main driver of the monthly increase, rising 0.3% for the third consecutive month. Food prices also increased 0.3%, with gains in both groceries and dining out.

The yield on the US 10-year Treasury was quoted at 4.44%, narrowing from 4.48%. The yield on the US 30-year Treasury was quoted at 4.93%, narrowing from 4.95%.

Brent oil was quoted higher at $68.23 a barrel at the time of the London equities close on Wednesday from $67.82 late Tuesday.

Gold was quoted higher at $3,338.63 an ounce against $3,325.36.

The biggest risers on the FTSE 100 were Fresnillo, up 48.00p at 1,388.00p, Prudential, up 23.00p at 898.80p, BT, up 4.50p at 180.80p, British American Tobacco, up 71.00p at 3,571.00p, and Games Workshop, up 270.00p at 16,420.00p.

The biggest fallers on the FTSE 100 were Antofagasta, down 48.00p at 1,836.50p, JD Sports Fashion, down 1.62p at 80.32.00p, Marks & Spencer, down 6.00p at 367.40p, Unite Group, down 11.77p at 842.23p, and easyJet, down 6.80p at 581.00p.

On Thursday’s economic calendar, look out for US producer price inflation and jobless claims. Meanwhile, the UK has GDP, trade balance, industrial production and other data.

On Thursday’s UK corporate calendar, Crest Nicholson publishes half-year results and Halma, PayPoint and others release full-year results.

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