Markets Open Cautiously Higher; Gilt Yields Ease to 4.86% Extending Rally
UK and European markets opened cautiously higher Wednesday. The FTSE 100 opened at 10,705, up 0.11%. UK 10-year gilt yields eased to 4.86%, extending Tuesday’s post-DIP rally. Sterling firmed to $1.3240. Bank of England rate-cut pricing for the 6 August meeting has now firmed to around 60% probability on the combination of falling oil prices, Burnham fiscal-rule continuity, and easing inflation expectations. Brent held at $86.10 awaiting the Doha outcome. Defence stocks continued to draw buying interest after Tuesday’s DIP-driven rally. The biggest near-term market mover today remains what Doha produces.
The Bank of England rate-cut pricing has tightened materially over the past week on the combination of Burnham’s fiscal-rule commitment and the Iran de-escalation easing oil-driven inflation pressure. The Ofgem price cap rise of 13% will feed into UK headline inflation figures but is already largely priced in by markets. The Bank of England Monetary Policy Report on 6 August is the next major UK macro variable. Sterling positioning still leans defensive into the Labour leadership transition but is firming as clarity emerges on the Burnham economic framework.