UK stocks rise as slower August hiring boosts rate pause optimism

By Siddarth S and Shubham Batra

(Reuters) -London stocks had their best day in a week on Friday after a survey signalled slower hiring activity in August, cementing bets that the Bank of England will pause its interest rate hikes with more signs of a cooling labour market.

The exporter-heavy FTSE 100 index rose 0.5%, climbing for a third consecutive week, led by a 2.6% jump in shares of automobiles and parts.

The domestically-focused FTSE 250 index climbed 0.4%, though clocked losses for the week.

An industry survey on Thursday showed that employers concerned about the economic outlook reduced hiring through recruitment agencies last month at the fastest pace in more than three years.

The pound hovered around a three-month low after hiring data added to signs of a slowdown in Britain’s jobs market.

“Sterling was something of an outlier (among other currencies) after the BoE noted (this week) the end of its monetary policy tightening may be in sight,” said Michael Hewson, chief market analyst at CMC Markets UK.

Investors also took comfort from a BoE survey on Thursday showing businesses were planning for their lowest price rises since February 2022, offering some reassurance to policymakers that inflation is on course to return to target.

Traders still see a 70% chance that the central bank will raise the bank rate by 25 basis points in September before it reaches the end of its rate-hiking cycle, with the yield on two-year British government bonds falling to a two-week low.

Global stocks came under pressure this week as a surge in oil prices raised concerns about persistent price pressures and U.S. economic data fed into worries that rates will remain higher for longer.

Among individual stocks, JD Sports jumped 2.6% after brokerage Berenberg lifted the target price on the stock while reiterating a “buy” rating.

Round Hill Music Royalty Fund soared 64.4% after it said Alchemy Copyrights will buy the investment firm, which owns the copyrights for the work of the Beatles and the Backstreet Boys, among others, for about $468.8 million.

(Reporting by Siddarth S and Shubham Batra in Bengaluru; editing by Subhranshu Sahu, Sherry Jacob-Phillips and Mark Heinrich)