UK mid-cap stocks outperform after soft U.S. inflation data

By Sruthi Shankar and Aniruddha Ghosh

(Reuters) -Britain's main equity indexes closed higher on Wednesday, with the mid-cap index outpacing the blue-chip FTSE 100 as investors cheered signs of moderating inflationary pressures in the United States.

The FTSE 100 edged up 0.3% to close at a fresh two-month high, but strength in sterling and weakness in healthcare stocks weighed on the internationally oriented index.

The midcap FTSE 250 index rallied 1.9% along with Wall Street after data showing a slower-than-expected rise in U.S. consumer prices prompted traders to cut their bets on aggressive interest rate hikes by the Federal Reserve next month. [.N]

"The market is thinking the Fed won't be hiking as aggressively so sterling has jumped and because the FTSE 100 has a lot more multinational companies - it's got dollar revenues and earnings - it is underperforming," said Patrick Armstrong, chief investment officer at Plurimi Wealth.

Insurer Aviva jumped 12.2% after saying it planned to give more money back to shareholders as it posted a better-than-expected 14% rise in first-half operating profit.

Motor insurer Admiral also gained 12.6% after results.

The FTSE 100 has outperformed its global peers with a 1.7% rise this year as higher interest rates boosted bank stocks, while oil and mining majors benefitted from a surge in commodity prices earlier this year following Russia's invasion of Ukraine.

The domestically focussed mid-cap index however has shed almost 14% in 2022 as a severe cost-of-living crisis and higher borrowing costs risk sending the British economy into a recession.

Deliveroo gained 7.4% after the food delivery company's chief executive officer said the gross transaction value (GTV) of its orders had picked up since the end of the second quarter.

Boosting the mid-caps, TP ICAP rallied 13.6% after the inter-dealer broker reported stronger-than-expected half-year profits, benefiting from heightened market volatility amid the Ukraine crisis.

Advertising and marketing company 4imprint group jumped 10.7% to a record high after strong first-half performance.

(Editing by Rashmi Aich, Sriraj Kalluvila and Alex Richardson)