London-listed stocks rose for a second straight session on Tuesday, as the pound tanked after data showed U.K. inflation unexpectedly stayed unchanged in July.
The FTSE 100 index UKX, +0.58% climbed 0.4% to close at 7,383.85, adding to a 0.6% advance from Monday.
The index was already trading higher from the open as fears of a nuclear war between the U.S. and North Korea continued to recede. North Korean leader Kim Jong Un decided not to launch a threatened missile attack on U.S. territory Guam, according to state media on Tuesday. The isolated nation’s leader, however, warned that he could change his mind “if the Yankees persist in their extremely dangerous reckless actions.”
Inflation: The London benchmark then moved a leg higher in mid-morning after the Office for National Statistics said U.K. inflation remained unchanged at 2.6% in July. Analysts had expected a 2.7% reading.
The miss sent the pound +0.1787% sharply lower to trade at $1.2861, compared with as high as $1.2971 earlier in the day and $1.2964 late Monday in New York. A weaker sterling tends to boost the U.K. blue-chip index as its components make most of their money overseas.
“The data reduces the need for the Bank of England to tighten monetary policy in response to above target inflation, which peaked a couple of months ago just below 3%,” said Craig Erlam, senior market analyst at Oanda, in a note.
“With price pressures appearing to have cooled and the economy still facing a couple of years of uncertainty and slower growth, markets appear to once again be pricing out a rate hike this year and possibly next,” he added.
Unemployment data out on Wednesday will also be scrutinized for how they may impact BOE monetary policy.