British equities jumped in early trade on Wednesday as investors cheered a surprise drop in domestic inflation, which spurred hopes that the Bank of England (BoE) could consider interest rate cuts early next year.
By 0807 GMT, the blue-chip FTSE 100 jumped 1.3%, touching its highest level since Sept. 21, while the more domestically-focussed FTSE 250 midcap index added 1.1%.
The pound dropped 0.6% after official data showed British inflation fell by more than any economist polled by Reuters predicted in November, pushing the headline rate to its lowest since September 2021.
Interest rate futures moved to price in a first rate cut by the BoE for as soon as March next year.
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Rate-sensitive real estate, real estate investment trusts and homebuilders advanced between 1.6% and 2.0%.
Heavyweight energy stocks added 2.2%, while banks jumped 1.8%.
Yields on UK government bonds also fell, with the yield on the benchmark 10-year gilt last at 3.563%.
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