London close: FTSE rallies amid renewed optimism over US-Iran talks

(Sharecast News) - London stocks ended sharply higher on Wednesday amid renewed optimism over a US-Iran peace deal, and helped along by solid gains from the likes of Marks & Spencer and Babcock as investors mulled a better-than-expected UK inflation reading. The FTSE 100 closed up 1% at 10,432.34, while Brent crude was down 5.3% at $105.43 a barrel.

Investors were reacting to the latest comments from Donald Trump, who told reporters at the White House that the US was in the "final stages" of talks with Iran, while also threatening once again to attack Tehran if a deal is not reached.

"We'll see what happens" Trump said, adding: "We'll either have a deal or we're going to do some things that are a little bit nasty. But hopefully that won't happen."

Danni Hewson, head of financial analysis at AJ Bell, said: "Oil prices eased somewhat after the latest comments from President Trump regarding an end to the conflict in the Middle East being close. It feels like we have been here before multiple times in recent weeks.

"Government bond yields, while still elevated, have also come back slightly on renewed optimism over peace talks."

On home shores, figures from the Office for National Statistics showed that inflation eased in April despite the war in the Middle East, although the slowdown was not expected to last.

The consumer prices index rose 2.8% in the 12 months to April, down from 3.3% in March and below consensus for 3%. The fall was driven by lower electricity and gas prices, following a reduction in the regulator's cap on charges on 1 April.

There were also smaller rises in water and sewage bills, and in vehicle excise duty, while food price inflation fell to 3% from 3.7% in the 12 months to April.

That was only partially offset by a rise in petrol and diesel prices, and in clothing and footwear prices, which rose 0.7%, all but reversing March's 0.8% decline.

Core inflation, which strips out more volatile energy, food, alcohol and tobacco prices, rose by 2.5%, down on March's 3.1% rise, while CPI including owner occupiers' housing costs slowed to 3% from 3.4%.

Chris Beauchamp, chief market analyst at IG, said: "Consumers can take heart from the softer inflation figure, but the relief is likely to be brief. Input prices surged year-on-year, and with oil prices firmly above $100 and showing no sign of reversing there is every reason to expect the May figure will show a resumption of the unpleasant upward trend.

"Measures like trying to cap supermarket food prices and holding off on a 5p rise in fuel duty are very much symbolic when set against the potential tidal wave of pricing pressures coming our way."

After the close of US markets, all eyes will be on first-quarter results from chip giant Nvidia.

Danni Hewson said: "Nvidia has found recently that merely beating expectations is not enough to sate the market, so there will be particular attention paid to what's driving earnings and guidance, as well as on progress of the rollout of new AI chips, margins and visibility on demand."

In equity markets, retailer Marks & Spencer was the standout performer on the FTSE 100 as it posted a sharp fall in annual earnings, reflecting the impact of last year's cyberattack, but said profits had recovered in the second half.

Babcock was boosted by an upgrade to 'buy' from 'add' at Peel Hunt.

Severn Trent advanced as the water utility lifted its 2028 adjusted earnings per share outlook to at least 250p from 224p following "another year of exceptional growth". United Utilities also gained.

RS Group surged after the industrial and electrical products distributor launched a £100m share buyback programme following a "resilient" full-year performance.

On the downside, Experian fell. The credit-checking firm announced a $1bn share buyback as it hailed a record full year, but shares slumped amid disappointment over its guidance for revenue growth.

AEP Plantations shares sank after Indonesian President Prabowo Subianto announced the country will tighten state control over its natural resources. AEP owns, operates and develops palm plantations in Indonesia and Malaysia.

Market Movers

FTSE 100 (UKX) 10,432.34 0.99% FTSE 250 (MCX) 22,838.38 1.20% techMARK (TASX) 5,940.14 0.77%

FTSE 100 - Risers

Marks & Spencer Group (MKS) 348.50p 6.64% Babcock International Group (BAB) 1,039.50p 5.30% Rolls-Royce Holdings (RR.) 1,224.60p 5.15% Antofagasta (ANTO) 3,822.00p 4.74% International Consolidated Airlines Group SA (CDI) (IAG) 397.80p 4.63% Melrose Industries (MRO) 506.20p 4.24% St James's Place (STJ) 1,186.50p 4.12% Fresnillo (FRES) 3,323.00p 4.07% Weir Group (WEIR) 2,534.00p 4.02% Lloyds Banking Group (LLOY) 99.86p 3.70%

FTSE 100 - Fallers

Experian (EXPN) 2,630.00p -2.95% Centrica (CNA) 194.75p -1.89% Relx plc (REL) 2,482.00p -1.78% Games Workshop Group (GAW) 18,850.00p -1.46% Flutter Entertainment (DI) (FLTR) 7,216.00p -1.42% Autotrader Group (AUTO) 496.30p -1.37% The Sage Group (SGE) 897.00p -1.21% 3i Group (III) 2,179.00p -1.13% Reckitt Benckiser Group (RKT) 4,714.00p -1.11% Smith & Nephew (SN.) 1,145.00p -1.04%

FTSE 250 - Risers

RS Group (RS1) 690.00p 14.90% Shawbrook Group (SHAW) 315.50p 7.50% Watches of Switzerland Group (WOSG) 682.50p 6.56% Close Brothers Group (CBG) 460.00p 5.07% WH Smith (SMWH) 498.00p 4.36% Baillie Gifford US Growth Trust (USA) 344.00p 4.24% Applied Nutrition (APN) 221.50p 3.99% Rank Group (RNK) 99.10p 3.55% Vistry Group (VTY) 263.40p 3.46% IP Group (IPO) 64.80p 3.18%

FTSE 250 - Fallers

AEP Plantations (AEP) 1,756.00p -21.08% Ceres Power Holdings (CWR) 595.50p -8.46% C&C Group (CDI) (CCR) 109.60p -4.53% Harbour Energy (HBR) 287.60p -4.39% Ithaca Energy (ITH) 274.60p -3.85% HGCapital Trust (HGT) 331.00p -2.65% NCC Group (NCC) 137.20p -2.42% Currys (CURY) 142.50p -2.20% Trustpilot Group (TRST) 238.80p -2.05% Kainos Group (KNOS) 830.00p -1.89%