The UK’s FTSE 100 reached a new high on Wednesday, driven by a decline in domestic inflation last month, which bolstered expectations for an interest rate cut potentially as early as March. Additionally, defence stocks found support from the robust performance reported. The blue-chip index rose to an intraday record high, up 1% at 10,666.68 points as of 1105, while the midcap index inched up 0.2% to trade at a four-year high.

In January, British inflation decelerated to 3.0%, marking its lowest level in almost a year, aided by more moderate increases in transport, food, and non-alcoholic beverages, as reported. Sterling exhibited minimal movement against the dollar as market participants factored in nearly an 80% probability of a reduction in borrowing costs in March. A subdued labour market report released on Tuesday exerted downward pressure on the currency.

Meanwhile, defence stocks rose 2.5%, with BAE Systems jumping 3.4% after reporting a better-than-expected increase in full-year operating profit, as global demand swelled its order backlog to a record 83.6 billion pounds ($113.40 billion). Glencore, fresh from a failed takeover approach from bigger rival Rio Tinto, rose 2.7% after the miner reported slightly lower annual earnings and announced a $2 billion shareholder payout.

Energy stocks rose 1.3%, as oil prices rebounded from Tuesday’s drop, with investors assessing progress in U.S.-Iran talks while remaining cautious about the prospects of a final deal that could alleviate supply concerns. Shares in Raspberry Pi surged for a second day, last gaining 26%, fueled by speculation that its products could benefit from low-cost artificial intelligence projects.