London shrugs off 3.5% inflation, then slips after the close

📉 A Short Report · Wed, 21 Oct 2026 · evening post

My call @ Wed 21 Oct evening: keeping it on for Thursday's open Right? @ Thu 22 Oct 08:00 UK:

Charts and prices are third-party data shown under TradingView's terms; we can't license them for reuse.

How the morning call did

This morning I kept selling through the inflation figure and the Governor's afternoon speech. London finished almost exactly where it was when I posted, so the call is holding. There was no fall to bank on, but nothing went against me either. The short is still on, and the loss limit comes down behind any slide.

The day in brief

Prices rose faster. The ONS says consumer prices were 3.5% higher in September than a year earlier, up from 3.1% in August and a little hotter than forecasters expected. Core inflation, which strips out food and energy, rose to 2.8% from 2.6%, about as expected. Dearer petrol looks to have done much of the pushing.

Borrowing climbed. The government borrowed about £24.5bn in September, up from £17.3bn in August, according to the ONS. With the Budget a week away, that leaves the Chancellor less room to play with.

A good day for GSK. GSK (GSK LN) said US regulators had approved its hepatitis B drug. Drug makers are among London's heaviest shares, so news like this props up the index.

A lift from New York. Wall Street opened firmer as SpaceX shares jumped, and that seems to be what helped London to a small gain on the day.

After the US close

Since London shut, the price has eased back by about a quarter of a percent. Tesla was due to report after New York's close, and Elon Musk has been talking up the idea of merging it with SpaceX. That is his talk, not a deal. The OFR Financial Stress Index is below its historical average (reading for 19 Oct 2026). Source: Office of Financial Research, OFR Financial Stress Index, 19 Oct 2026. Our wording; not endorsed by the OFR. The US 10-year Treasury yield was 5.12% and the 2-year 4.79%, on 20 Oct 2026. Source: U.S. Department of the Treasury, daily par yield curve rates, 20 Oct 2026.

Looking ahead to Asia

No big figures are due from Asia overnight, so the mood in New York and any reaction to Tesla will probably set the tone.

What could move markets

Ex-dividend Thursday. Thursday is the day London shares usually go ex-dividend. When big companies do, the index loses a little at the open on paper, though nobody has actually sold anything.

Rates after the inflation jump. A 3.5% figure makes a rate cut at the Bank of England's 5 November meeting look less likely. If gilt yields keep rising, housebuilders and other rate-sensitive shares could feel it.

The Budget, a week today. September's borrowing figure is the biggest in a year, and worries about new taxes on the banks have been doing the rounds. Expect more of that as the day gets closer.

Source: Office for National Statistics, Consumer price inflation, UK: September 2026; Office for National Statistics, Public sector finances, UK: September 2026; GSK, announcement of 21 Oct 2026; Office of Financial Research; U.S. Department of the Treasury; London Stock Exchange, dividend timetable; Bank of England, upcoming MPC dates; GOV.UK, Budget 2026 date.