The annual rate of inflation has fallen to its lowest level since March, opening the door to another interest rate cut next month.
January’s drop from 3.4% to 3% came as a period of lower oil prices fed through to garage forecourts.
Meanwhile, the FTSE 100 index set another record high in a session when BAE Systems reported forecast-beating annual results.
FTSE 100 Live Wednesday
- Inflation on path to 2%
- BAE record order backlog
- Glencore earnings momentum
Market update: FTSE 100 sets new record, Glencore and BAE Systems up 3%
10:15 , Graeme EvansThe FTSE 100 index today topped 10,600 for the first time after defence and mining stocks rallied on the back of strong results by BAE Systems and Glencore.
The advance, which followed last night’s record close of 10,556.17, saw London’s top flight set a new intraday peak of 10,647.51 with a rise of 0.9% or 91.34 points.
The mood benefited from expectations of another Bank of England interest rate cut after January’s annual rate of inflation fell to 3% from 3.4% the month before.
Russ Mould, investment director at AJ Bell, said: "Lower rates typically translate into weaker sterling which, in turn, flatters the overseas earnings which dominate the index.”
Mining giant Glencore rose 3% after its annual results showed second half earnings momentum and also included a top-up distribution to shareholders.
The shares surged 16p to 502p, alongside gains of 131p to 3748p for fellow copper miner Antofagasta and 78p to 3577p for Anglo American.
BAE Systems jumped 3% or 67p to 2096p after its annual results showed a performance ahead of the improved guidance it gave at the interim stage.
Sales rose 10% to £30.66 billion and underlying earnings improved by 12% to £3.32 billion as BAE capitalised on a new era of defence spending.
With order intake up £3.1 billion to £36.8 billion, the group expects 2026 sales growth of between 7% and 9% and underlying earnings in the region of 9%-11%.
City bank Berenberg said the guidance was a “touch light” but that this was offset by the “standout metric” of free cash flow, which came in 41% higher than forecast in the 2025 results.
BAE plans to pay a final dividend of 22.8p a share on 4 June, which lifts the total dividend for last year by 10% to 36.3p.
Other shares rallied in the defence sector as Rolls-Royce lifted 26.5p to 1323.5p and Babcock International put on 17p to 1368p.
The strong session for the FTSE 100 also reflected the support of BP, NatWest and GSK after their shares rose by about 1.5%. Barclays continued its post-results momentum by adding another 9.15p at 483.1p.
Glencore hails second half momentum, shares up 3%
09:09 , Graeme EvansGlencore shares have risen 3%, up 15.3p to 501.3p after the mining giant’s annual results highlighted underlying momentum in the second half of the year.
Adjusted earnings fell 6% across the year to $13.5 billion, but with the second half figure of $8.1 billion coming in 49% higher than the first half.
This reflected higher metals prices and improved production volumes, especially copper.
At a recent City presentation, Glencore set out its ambition to become one of the world’s largest copper producers.
It expects output of more than one million tonnes by the end of 2028 and 1.6 million tonnes by 2035, supported by its “enviable portfolio” of capital-efficient copper growth options.
Today’s results showed that Glencore met guidance for full year production of its key commodities for a second consecutive year.
In terms of shareholder returns, Glencore announced a base distribution of 10 US cents a share worth a total of $1.2 billion plus a top-up of seven US cents.
BAE Systems leads FTSE 100 to new record, Glencore up 2%
08:22 , Graeme EvansThe FTSE 100 index today posted an intra-day record of 10,609.91, having added another 0.5% or 53.74 points to last night’s record close.
BAE Systems shares jumped 6% or 120p to 2149p after it posted forecast-beating annual results alongside a record order backlog.
Richard Hunter, head of markets at Interactive Investor, said: “BAE is basking in the increasing heat of geopolitical tensions with a set of results which have comfortably blown past estimates.”
Glencore shares rallied 2% or 8.25p to 494.5p after the miner published its results. Among the fallers, Diageo and London Stock Exchange shares dropped by about 1%.
Inflation rate seen falling to 2% by spring
08:06 , Graeme EvansThe lowest annual rate of inflation since March has opened the door to another interest rate cut by the Bank of England’s monetary policy committee (MPC).
Capital Economics points out that April’s inflation figure is set to decline steeply, perhaps below 2% as government-set prices and taxes drop out of the annual comparison.
It added: “If we are right in thinking that CPI inflation will average 1.8% in the fourth quarter of this year, then the MPC may ultimately end up cutting rates further than investors expect, to 3% this year, with the chances of the next rate cut happening in March rather than our current forecast of April edging higher.”
Deutsche Bank highlighted that services inflation remains sticky, with a far smaller drop than expected at 4.4% year-on-year.
However, it added that the disinflation path remains largely intact.
“Despite stronger services price momentum to start the year, we see CPI taking another big step down in spring, as some of the big administrative prices wash out of the annual rate calculation. We expect CPI to track nearer 2% by spring.”
BAE reports record order backlog, dividend up 10%
07:43 , Graeme EvansBAE Systems today announced a record £83.6 billion order backlog as the defence giant hailed “another year of strong operational and financial performance”.
Underlying earnings bettered the upgraded guidance given at interim results - up 12% to £3.32 billion as BAE capitalised on a new era of defence spending. Annual sales lifted 10% to £30.66 billion.
BAE’s order intake rose by £3.1 billion to £36.8 billion, with all sectors performing well to push the overall backlog up by £5.8 billion.
It said: “Around the world, threats to national security continue to grow. This is driving governments to increase defence spending, as they seek to ensure armed forces are equipped to protect their nations and deter future aggression.
“For decades, governments have placed trust in us to deliver their defence and security capabilities.”
The group, which employs 111,400 people in more than 40 countries, expects sales growth in 2026 of 7%-9% and underlying earnings up by between 9% and 11%.
BAE plans to pay a final dividend of 22.8p a share on 4 June, which lifts the total dividend for 2025 by 10% to 36.3p.
Chief executive Charles Woodburn said: “With a record order backlog and continuing investment in our business to enhance agility, efficiency and capacity, we’re confident in our ability to keep delivering growth over the coming years.”
Inflation rate dips to lowest level since March
07:10 , Graeme EvansInflation today fell in line with City forecasts to an annual rate of 3%, the lowest level since March last year.
January’s reading compared with 3.4% in December and 3.8% in September, with last month’s decline driven partly by lower petrol prices.
Airfares were another downward driver in the month as prices dropped back following their increase in December.
The Office for National Statistics also said that lower food prices helped push the rate down, particularly for bread and cereals and meat.
ONS chief economist Grant Fitzner added: “The cost of raw materials for businesses fell over the past year, driven by lower crude oil prices, while the increase in the cost of goods leaving factories slowed.”
The figures should keep alive hopes for a fresh Bank of England interest rate cut, possibly as soon as March.
FTSE 100 set to extend record, Wall Street markets finish higher
07:01 , Graeme EvansThe FTSE 100 index is set to build on last night’s record close after Wall Street markets yesterday recovered from a poor start.
IG futures point to a rise of 0.2% after London’s top flight yesterday set an all-time peak of 10,556.17, up 0.8% or 82.48 points.
The Dow Jones Industrial Average, S&P 500 index and Nasdaq Composite all finished up by 0.1%, while the Nikkei 225 has rallied by more than 1%.
The price of gold is at $4925 an ounce and Brent Crude at $67.25 a barrel. The pound stood at $1.3555 prior to the release of today’s inflation print.
Yesterday’s unemployment and wage growth figures lifted expectations for further Bank of England rate cuts, possibly as soon as next month.
