FTSE 100 boosted by US inflation print and watering down of banking rules

London markets, lead by the FTSE 100, received a boost on Thursday morning following a strong performance from US stocks and the Bank of England watering down proposals for new bank capital rules.

The blue-chip FTSE 100 jumped 1.01 per cent at 8,276.64, while the mid-cap FTSE 250, which is more closely aligned with the health of the UK economy, rose 1.15 per cent to 20,773.38

The S&P 500 closed 1.07 per cent higher on Wednesday, helped by fresh consumer price index (CPI) data that has all but secured the US Federal Reserve’s first rate cut in four years next week.

US inflation fell to its lowest level since February 2021 in August, but stickiness in underlying inflation could dissuade the Federal Reserve from making a jumbo 0.5 per cent interest rate cut at its next meeting on 18 September.

Instead, money markets are now pricing in an 87 per cent chance of a 0.25 per cent cut.

Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: “CPI isn’t the Fed’s preferred inflation measure, but with a little bit of jigging, we can get a decent idea of what the preferred PCE [personal consumption expenditures] number might look like, and it’s all starting to paint the same picture – inflation that’s behaving well.”

The biggest riser on the FTSE 100 was asset manager Intermediate Capital, up 3.6 per cent after news on Wednesday that it raised $17bn (£13bn) for its flagship direct lending strategy – one of the largest fundraises of its kind in Europe.

The biggest faller is investment manager M&G, down 2.1 per cent.

Shares in Lloyds, HSBC, Barclays and Natwest rose after the Bank of England confirmed it was relaxing a proposed overhaul of the UK banking system in a bid to support “growth and competitiveness”.

The BoE unveiled changes to its plan for implementing international standards known as Basel 3, including leaving Tier 1 capital requirements for major lenders “virtually unchanged” and pushing back the deadline for banks to begin implementing its rules by six months to January 2026.

Regulators around the world have been refining their interpretations of the rules amid strong industry lobbying to make them less stringent. The Fed announced on Tuesday that it would halve the capital increase faced by the biggest Wall Street banks after some threatened lawsuits over the rules.

On Thursday morning, Lloyds shares rose 1.3 per cent, HSBC 1.7 per cent, Barclays 2.1 per cent and Natwest one per cent.