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London-listed shares fell as UK inflation eased slightly in November, helped by falling oil prices, while government bonds rose on Wednesday.

UK inflation last month hit a 41-year high, falling to 10.7 per cent from 11.1 per cent in October, according to data from the Office for National Statistics.

Market reaction was mixed, however, with London’s FTSE 100 down 0.3 percent in early trade. Energy and utilities companies were among the best performers of all other sectors in negative territory.

Gilts have outperformed by rallying across the board. The two-year yield fell 0.06 percentage points to 3.44 percent, close to where it has hovered since late October, as the price of the debt instrument rose. The 10-year yield fell 0.02 percentage points to 3.27 percent.

Sterling strengthened, meanwhile, rising 0.15 percent to $1.23 against the dollar. The currency, which has steadily gained against the dollar over the past two months, data on Tuesday showed that US inflation eased in November, bolstering arguments for a small rate hike when the Federal Reserve meets later today.

The Bank of England, which is due to meet on Thursday, is expected to raise rates quickly as the UK economy teeters on the brink of recession.

Francesco Pessol, FX strategist at ING, was not surprised by the pound’s “muted” response to November inflation. Investors are nervous ahead of the Fed’s upcoming economic forecast, while double-digit inflation in the UK means the BoE could hike by 0.5 percentage points later this week.

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