^{Photo: London Insider}

London’s FTSE 100 led European markets higher on Wednesday, climbing 0.9% as investors reacted to November’s U.K. inflation data and positioned for upcoming central bank decisions. The broader pan-European Stoxx 600 finished slightly above the flatline, with most major bourses posting gains amid a mixed sector performance.

The U.K. Consumer Price Index cooled to 3.2% in November, down from 3.6% in October, reinforcing expectations that the Bank of England may cut interest rates this week. Economists anticipate the BOE’s nine-member monetary policy committee will trim rates by 25 basis points to 3.75% in response to slowing economic growth and early signs of rising unemployment.

Financial services and homebuilder stocks drove the FTSE 100’s gains. Barratt Redrow led the index, climbing 3.7%, while Phoenix Group, a major retirement savings firm, rose 3.3%. The pound weakened in the wake of the inflation report, trading about 0.2% lower against the U.S. dollar and 0.3% lower against the euro.

U.K. government bonds rallied as yields fell across the curve. The 10-year gilt yield declined 4 basis points, with similar drops in 30-year gilts. Long-term U.K. borrowing costs remain the highest among G7 nations, with 20- and 30-year yields staying above 5%, reflecting persistent fiscal pressures despite easing inflation.

Attention now shifts to central bank meetings across Europe. The European Central Bank is expected to maintain its benchmark rate at 2% in Thursday’s final policy session of 2025, while ECB President Christine Lagarde signaled likely upward revisions to eurozone growth forecasts, following the September GDP projection of 1.2% growth. The Riksbank and Norges Bank are also scheduled to announce their last monetary policy decisions for the year this week.

In corporate news, Diageo announced the sale of its 65% stake in East African Breweries to Japan’s Asahi Holdings for approximately $2.3 billion, sending its shares down 0.2%. Meanwhile, U.S. equities showed weakness, with the S&P 500 heading for a fourth consecutive negative session, while Asia-Pacific markets traded mixed as investors assessed Japan’s latest trade figures.

The combination of easing inflation, expected BOE rate cuts, and ongoing global central bank activity has set the stage for heightened market volatility as 2025 draws to a close.