UK inflation falls to 3% as FTSE 100 hits record high

​​​Inflation drops to its lowest level since March 2025

​UK headline consumer price inflation (CPI) fell from 3.4% to 3.0% in the latest reading, its lowest level since March 2025. The decline was driven by falling transport costs, lower food prices, and a softening in education-related costs.

​Petrol prices and airfares provided two of the sharpest downward contributions to the monthly data. These are categories that can swing the headline figure meaningfully in either direction, and on this occasion they moved in the right direction for consumers and policymakers alike.

​Bank of England rate cut bets remain firmly in place

​Markets continue to price in a strong probability of a Bank of England (BoE) rate cut at either the March or April policy meeting. Wednesday's inflation print did nothing to dislodge that expectation -- if anything, it provided modest additional support for the case for easing.

​Earlier in the week, UK labour market data added to the picture. Signs of softening in employment and wage growth had already moved the dial for rate cut watchers, and the inflation reading arriving in line with expectations keeps the trajectory intact.

​It's worth keeping some perspective here. The BoE will want to see more than a single month's data before committing to action, and services inflation -- which tends to be stickier -- remains a watch point. But the weight of evidence is shifting gradually in favour of a cut.

​Sterling and gilts hold steady after CPI release

​The British pound hovered around the $1.35 - $1.36 range in the aftermath of the data, showing little dramatic movement in either direction. That kind of muted reaction suggests much of the improving inflation outlook was already priced into sterling by the time the number dropped.

​Gilt yields were similarly stable, with no significant repricing across the curve. This is consistent with a market that had largely anticipated today's outcome and positioned accordingly. A large surprise -- in either direction -- would have generated a more decisive move.

​The relative calm in UK fixed income and currency markets is arguably a sign of a market in decent shape - forward guidance from the BoE has been credible enough to keep volatility in check, even as the macro picture shifts.

​FTSE 100 climbs to another all-time high

​The FTSE 100 added around 0.3% to push to yet another record level, continuing a run that has seen the index notch fresh highs on multiple occasions in recent weeks. Defence and mining stocks led the charge, helped by a combination of strong earnings and firmer commodity prices.

​It is worth noting that this is not an index grinding higher on valuation expansion alone. There is genuine earnings support behind the move, and today's results from BAE Systems and Glencore underlined that point clearly. The index has real firepower from its heavyweight constituents.

​Breadth matters in these situations, and while not every sector contributed positively, the gains were not narrowly concentrated. A record high built on a handful of names is less reassuring than one with broader participation -- and today's session leaned towards the latter.

​BAE Systems surges on earnings and record order backlog

​BAE Systems rose as much as 5.9% after releasing results that beat on several key metrics. Revenue came in higher year-on-year (YoY), as did profit, while the company's order backlog reached record levels - a figure that tends to get the attention of long-term investors in the defence sector.

​Cash flow was the other standout. Coming in ahead of expectations, it signals that BAE is not just winning contracts but converting them into cash efficiently. That combination of top-line growth, profitability, and strong cash generation is about as clean a results set as the defence sector tends to produce.

​The backdrop for defence stocks remains favourable. Elevated geopolitical risk across multiple theatres has kept government defence spending commitments high, and BAE's international reach means it benefits from a diversified customer base rather than relying on any single government contract cycle.

​Those looking to invest in BAE Systems shares can do so through IG Invest or a share dealing account, which provide straightforward access to FTSE 100 stocks without leverage.

​Glencore advances despite a dip in core earnings

​Glencore posted a 6% fall in core earnings to $13.5 billion, a figure that might normally weigh on a stock. Instead, the shares advanced, with investors focusing on stronger copper prices in the second half of the year and a broadly positive trading update that softened the blow from coal weakness.

​The narrative here is one of transition and resilience. Coal has been a significant contributor to Glencore's earnings in recent years, but the market has long expected that contribution to fade. The fact that copper and other industrial metals are picking up some of the slack is being read as broadly positive.

​Second-half momentum was another key point from the results. A business that enters a new year with improving trajectory tends to generate more optimism than one that has just posted a strong year but is showing signs of slowing. Glencore's direction of travel appears to be working in its favour.

​Copper, nickel, and zinc all pushed higher in what was described as thin holiday trading - a caveat worth keeping in mind. Moves in low-liquidity conditions can exaggerate the underlying direction, though the broader trend in industrial metals has been supportive for some time.

​Gold held above $4900 an ounce, consolidating at levels that would have looked extraordinary not so long ago. The precious metal continues to attract demand as a hedge against uncertainty, with central bank buying and geopolitical risk providing structural support to the price.

​Silver approached $76 an ounce, moving in sympathy with gold while also benefiting from its industrial demand side. Silver tends to be more volatile than gold in both directions, which makes it an interesting market for those comfortable with a higher-risk profile. You can find out more about how to trade silver on our dedicated guide.

​Raspberry Pi extends its extraordinary weekly surge

​Raspberry Pi shares jumped a further 18% on Wednesday, taking the stock's gains over the week to a remarkable 72%. The catalyst appears to be speculation that rising demand for AI agents could accelerate the adoption of edge computing hardware -- an area where Raspberry Pi's low-cost, programmable devices have obvious potential applications.

​Fed commentary pushes US and European yields higher

​Federal Reserve (Fed) officials added a new dimension to the rate conversation on Wednesday, suggesting that AI-driven productivity gains could put upward pressure on interest rates over time. The logic is straightforward: higher productivity means a higher neutral rate, which reduces the need for monetary easing.

​US Treasury yields edged higher on the back of the commentary, and European bonds moved in sympathy. It is a reminder that even when domestic data points in one direction, cross-border influences -- particularly from the Fed - can pull in the opposite direction.