After erasing nearly all gains from the previous week, oil prices (BZ=F) opened Wednesday's trading session with cautious gains as traders shifted their focus back to the unfolding situation in the Middle East.

Brent crude futures rose 0.3%, settling at $74.46 a barrel, while US West Texas Intermediate (WTI) (CL=F) crude edged 0.3% higher to $70.81 per barrel during early European trading.

Tuesday's slump was triggered by disappointing news from China, where consumer prices rose less than anticipated, indicating sluggish consumer demand. This was compounded by the International Energy Agency's (IEA) third consecutive downward revision of its global oil demand forecast for 2024.

Adding to the market’s uncertainty, a report from the Washington Post revealed that Israel had told the United States it would refrain from targeting Iranian oil infrastructure in its retaliatory strikes. This announcement initially dampened the so-called wartime premium on oil prices. However, Israel subsequently stated that it would retain the discretion to make its own decisions regarding potential strikes on Iran, reigniting speculation about possible targets.

Yeap Jun Rong, an analyst at IG, said:

Average house prices in the UK roseby 2.8% in the year to August, the Office for National Statistics said on Wednesday.

The annual growth rate accelerated from 1.8% in July, raising typical house prices to £293,000.

Average house prices increased in England to £310,000, up 2.3%, in Wales is was up 3.5% to £223,000, and in Scotland to £200,000 — a rise of 5.4%.

The average house price for Northern Ireland was £185,000 in the second quarter of 2024, up 6.4% annually.

Rightmove’s Tim Bannister said:

The cost of rent outside of London have surged to a record high of £1,344 per calendar month (pcm), marking the 19th consecutive quarterly record.

This represents a 5.2% increase from last year, albeit the slowest rate of growth since 2021, according to figures from property site Rightmove. In London, the average rent has similarly soared to £2,694 pcm in the third quarter of 2024, a 2.5% rise from last year’s £2,627 pcm

Both national and London price trends are in line with Rightmove’s end-of-year prediction for advertised rent growth, with advertised rents predicted to be 5% higher by the end of 2024 outside of London, and 3% higher in London.

The average number of inquiries per rental property has decreased to 15 from 23 last year, yet this figure is still nearly double the 8% recorded in 2019. Although available rental properties have increased by 13% year-on-year, they remain 27% below pre-pandemic levels.

The pound (GBPUSD=X) has fallen sharply lower to its lowest level in two months after inflation fell by more than expected last month.

The pound fell 0.6% against the dollar, trading at $1.2991, having remained stable prior to the inflation figures.

The UK’s inflation rate dropped to 1.7% year-on-year in September, down from 2.2% in August. This figure marks the lowest inflation reading since April.

Traders will be calculating that September’s larger-than-expected drop in inflation makes it easier for the Bank of England to cut interest rates, which makes it less lucrative to hold sterling.

Joe Maher, assistant economist at Capital Economics, said: “We expect sterling to weaken by approximately 4% against the euro and about 1% against the dollar by the end of 2025.

“We anticipate yield gaps to move against sterling, particularly in relation to the euro, over the next year. Our view is that the Bank of England will lower interest rates by significantly more than what is currently reflected in money markets.”

Sterling was also lower against the euro (GBPEUR=X), slipping 0.5% to €1.1940 at the time of writing.

The latest figures also raise pressure on the Bank of England to cut interest rates from the current level of 5% to keep inflation at its target level.

Money markets now predict a 91% chance of a quarter-point cut from the Bank of England at its next meeting in early November. This is up from just below 80% before the inflation report was released.

This would bring UK interest rates down from 5% to 4.75%.

Lindsay James, investment strategist at Quilter Investors, said:

BoE governor Andrew Bailey had previously indicated a desire to bring interest down, saying earlier this month that rate cuts could become “more aggressive” if needed.

• Food and non-alcoholic beverages: 1.9%, up from 1.3% in August

• Alcoholic beverages and tobacco: 4.9%, down from 5.8%

• Clothing and footwear: 0.8%, down from 1.6%

• Housing, water, electricity, gas and other fuels: -1.7%, down from -1.6%

• Furniture, household equipment and maintenance: -1%, up from -1.3%

• Health: 5.2%, down from 5.5%

• Transport: -2.2%, down from 1.3%

• Communication: 5.2%, up from 4.1%

• Recreation and culture: 3.8%, down from 4%

• Education: 4.4%, down from 4.5%

• Restaurants and hotels: 4.1%, down from 4.3%

• Miscellaneous goods and services: 3.3%, unchanged.

UK inflation fell to 1.7% in the year to September, the lowest rate since April 2021, the Office for National Statistics (ONS) said.

According to new figures, the Consumer Price Index (CPI) rose by 1.7% in the 12 months to September 2024, down from 2.2% in August. This means inflation has fallen below the government-set target of 2% for the first time since 2021.

ONS chief economist Grant Fitzner said:

Core inflation, which excludes energy, food, alcohol and tobacco, dropped to 3.2% from 3.6% in August.

Price rises in the services sector, one of the motors of the UK economy, eased to 4.9% last month from 5.6% in August, hitting its lowest rate since May 2022.

Investors had expected inflation to fall to 1.9%. Inflation has been on a downward trajectory since hitting a peak of 11.1% in October 2022, driven by increases in energy prices and a sharp rise in food prices.

Stocks in Asia were mixed overnight after a tech-led sell-off on Wall Street, which was fuelled by worries about the sustainability of the AI rally.

The Nikkei (^N225) fell 1.8% on the day in Japan as tech stocks fell after Dutch computer chip equipment supplier ASML (ASML) warned of a slower recovery in demand for semiconductors outside of the AI boom.

Meanwhile the Hang Seng (^HSI) rose 0.2% in Hong Kong. The Shanghai Composite (000001.SS) was 0.05% up by the end of the session, rebounding after recent losses.

Across the pond, Wall Street stocks closed lower on Tuesday. The Dow (^DJI) slumped 0.8% to 42,740.29, as did the broad-based S&P 500 (^GSPC) to 5,815.26.

The tech-heavy Nasdaq Composite Index (^IXIC) retreated 1% to 18,315.59.

The yield on the 10-year Treasury fell to 4.03% from 4.1% late Friday after the US bond market was closed on Monday.

Good morning, and welcome back to our markets live blog. As usual we will be taking a deep dive into what's moving markets and happening across the global economy.

Here's a quick look at what's on the agenda for today...

• 7am: Trading updates: Whitbread, Liontrust Asset Management

• 7am: UK inflation report for September

• 9.30am: House price and rental costs data from the ONS

• 12pm: US weekly mortgage approvals

• 2pm: IMF to publish a chapter of its World Economic Outlook

• 3pm: US Crude Oil Inventories