UK stocks edge higher as weak survey signals BoE rate pause

Further aiding the UK equities on Friday were lower oil prices and U.S. bond yields. Global stock markets have come 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 interest rates will remain higher for longer.

London stocks edged higher on Friday after a survey signalled slower hiring activity last month, raising the probability that the Bank of England will press the pause button in its efforts to rein in inflation.

The exporter-heavy FTSE 100 index rose 0.1% by 0800 GMT, while the domestically focussed FTSE 250 index was up 0.4%. Both the indexes, however, were set for weekly losses. Employers concerned about the economic outlook reduced hiring via recruitment agencies last month at the fastest pace in more than three years, an industry survey showed.

"This contraction suggests heat may be coming out of the economy in a more pronounced way, which would suggest interest rates are having the desired effect and adds weight to the argument we're near the top of the (rate) cycle," Sophie Lund-Yates, a lead equity analyst at Hargreaves Lansdown said in a note. 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 are betting on a 25% chance that the central bank will hold rates steady later this month. The yield on two-year British government bonds briefly fell to a two-week low, as investors scaled back bets of further rate hikes.

Inflation-sensitive stocks such as retailers climbed nearly 1%. Further aiding the UK equities on Friday were lower oil prices and U.S. bond yields.

Global stock markets have come 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 interest rates will remain higher for longer. Shares of Berkeley Group Holdings were up 0.8% after the British high-end housebuilder reaffirmed its profit forecast, but joined sector peers in highlighting a gloomy trading environment in the face of rising interest rates and wider macro economic concerns.