By Siddarth S
(Reuters) -UK stocks rose on Wednesday after data showing a surprise fall in inflation in August boosted sentiment and raised hopes that the Bank of England (BoE) was nearing the end of its interest rate hiking cycle.
The exporter-heavy FTSE 100 rose 0.6%, by 0820 GMT, while the sterling weakened 0.3% against the U.S.
dollar, hitting its lowest levels since May.
Britain’s annual consumer price inflation (CPI) unexpectedly fell to 6.7% last month from 6.8% in July, data showed, prompting investors to bolster bets that the BoE would pause its historic run of rate hikes as soon as Thursday.
Economists had forecast CPI would rise to 7.0%.
“CPI data makes tomorrow’s (BoE) decision a little bit more balanced and the market is no longer fully priced for a rate hike,” said Michael Metcalfe, head of macro strategy at State Street Global Markets.
“If they (BoE) do hike, the message probably will be that they are going to be on hold for quite some time and that will mitigate any damage that the hike will do to markets tomorrow.”
Money markets are betting on a 45% chance for the BoE to hold interest rates steady at 5.25% on Thursday.
The U.S.
Federal Reserve is widely expected to keep rates unchanged at its monetary policy decision later in the day.
Rate-sensitive homebuilder stocks jumped 3.8%, leading sectoral gains and aiding a 1.2% rise in mid-cap stocks.
M&G’s rose 2.8%, among the top gainers on the benchmark index, after the insurer posted a better-than-expected 31% rise in first-half operating profit.
Education group Pearson said it has appointed Microsoft executive Omar Abbosh as its new CEO.
Its stock fell 4.4%.
PageGroup rose 1.6% after the recruiting firm said it was targeting 1.5 billion pounds ($1.85 billion) in shareholder returns and operating profits of 400 million pounds by 2030.
(Reporting by Siddarth S in Bengaluru; Editing by Rashmi Aich and Savio D’Souza)
