Update: The FTSE 100 pulled back as Wednesday progressed, in line with other European markets, as concerns grew about the durability of the supply of Russian gas to Europe. 

After making early gains despite the annoncement UK inflation had roared to a new 40-year high of 9.4% in June, the FTSE 100 was trading down 30 points, or 0.4%, at 7,266 at 4.15pm.

‘European markets initially got off to a positive start today, helped by the spill over from yesterday’s reports that [major pipeline] Nord Stream 1 would restart on time. However these gains have been tempered over doubts as to whether gas flows would return to similar levels as before,’ said CMC Markets analyst Michael Hewson. 

Hewson pointed to comments from EU Commission President Ursula Von der Leyen about the need to ration gas over the winter as effectively upping the ante further, while Russia signalling plans to annex more areas of Ukraine also hit sentiment. 

Losses in Europe came despite strong early trading on Wall Street, with the S&P 500 moving 0.7% higher. Tech stocks made even stronger headway, helping Scottish Mortgage (SMT ) investment trust sping to the top of the FTSE 100, gaining 4.4% to trade at 835p. Smithson (SSON ), the global smaller companies trust run by Terry Smith’s fund firm, rallied 4.1% to £13.21.

 The FTSE 250 was able to consolidate its morning gains. The mid-cap index traded up 149 points, or 0.8%, at 19,432 by late afternoon. 

(09:40) FTSE climbs despite rate rise pressures

The FTSE 100 moved higher this morning amid growing expectations for a leap in interest rates as UK inflation soared to a new 40-year peak. 

The blue-chip index gained 0.6%, or 43 points, at 7,339 after the Office for National Statistics reported the cost of goods and services had jumped by 9.4% in the 12 months to June, the highest figure since February 1982 and up from 9.1% in May.

The soaring costs of energy and food have kept UK inflation at the highest level among all G7 nations, prompting expectations for further swift interest rate rises from the Bank of England. Sterling held its ground to trade at $1.1998 against the dollar, but analysts said that was more a case of a softer greenback than a stronger pound. 

Neil Wilson, an analyst at Markets.com, said it was ‘no wonder the [Bank of England] governor Andrew Bailey (pictured) was yesterday chirruping about a 50 basis point hike at the next meeting’.

‘With energy prices to rise again in the autumn, the [inflation] peak has not been reached yet,’ he said, adding there was a growing sense policymakers have been ‘too slow to react and too complacent about inflation’.

The biggest winner among blue chips was advertising giant WPP (WPP), which rose 3.2%, or 27p, at 862p, pulled higher by American rival Omnicom reporting a strong set of second quarter results. Ocado (OCDO) also clawed back some of yesterday’s losses, up 3.1%, or 23p, at 778p, despite concerns about inflation hitting both consumer spending and costs at the grocery delivery platform.

The main index was also helped by reports Russia will resume gas exports to Europe via its Nord Stream 1 pipeline, which carries a third of Russia’s gas exports to the EU and has been closed for maintenance since 11 July. BP (BP) traded 1.3% ahead to 390p and Shell (SHEL) was up 0.6% at £20.47.

The FTSE 250 pushed 0.4%, or 77 points, higher to 19,359, with Aston Martin Lagonda (AML) leading the mid-cap index. The luxury car maker has had a rollercoaster week, adding 30% on Monday before giving back nearly half of those gains yesterday. Today, the shares motored 7.9%, or 41p higher, at 560p.

Medical products company Convatec (CTEC) added 3% to trade at 226p on the back of an analyst target price upgrade, while 4imprint (FOUR) extended its rally into a second day, up 2.9% at £29.85, following an announcement that full year profit at the promotional products printer will beat expectations.

Royal Mail (RMG) weighed on mid-caps with a 5.2%, or 14p, decline to 270p after a first quarter revenue drop of 11.5%. The group also threatened a split after a name change to International Distributions Services. Management said there could be a separation should its core division see no ‘significant change’.

US rally lifts trusts

On Wall Street, encouraging second-quarter earnings reports buoyed US-focused growth funds. Scottish Mortgage (SMT ) jumped 2.9% to 823p and Baillie Gifford US Growth (USA ) leaped 3.5% to 167.6p following a US rally overnight.

RTW Venture (RTW ) rose 3.6% to $1.14 on a 12% discount as its listed portfolio company Immunocore raised $140m from investors, including RTW.

The boost to tech shares from Netflix reporting a smaller-than-expected fall in subscriber numbers lifted Polar Capital Technology (PCT ) 1.9% to £20.58 on a 9% discount. Its annual report revealed a 7.7% drop in net asset value in the year to 30 April, underperforming its benchmark’s 0.9% dip.

LXi Reit (LXI ) added 1.4% to 148.6p on a 2% premium as the long-lease property fund followed its merger with Secure Income by hedging the enlarged group’s debt against rising interest rates at a maximum all-in cost of 4.1%.

Custodian Reit (CREI ) firmed 1.3% to 107.6p on a 10% discount as the regional real estate fund lifted its weighting to retail warehouses to 24% with two acquisitions in the Midlands.