UK markets under pressure as sterling slides and miners weaken

​​​Pound slides on dovish Bank of England expectations

Sterling tumbled to its weakest level since August, falling below 1.33 against the US dollar as traders ramped up expectations for earlier interest rate cuts from the Bank of England (BoE). The move represents a significant shift in sentiment towards the British pound, which had enjoyed a period of relative strength in recent months.

​The currency's decline was driven by mixed employment data that suggested the UK labour market may be cooling faster than anticipated. This development has emboldened traders betting on a more dovish stance from the BoE, with money markets now fully pricing in a first rate cut as early as March.

​Two-year gilt yields dropped to their lowest levels since mid-August, reflecting the market's conviction that monetary policy easing is approaching. The sharp move in government bond yields underscores how quickly sentiment can shift when economic data points towards a potential policy pivot.

​Mixed UK jobs data fuels rate cut speculation

​The UK's latest employment figures painted a complex picture of the labour market, with unemployment rising to 4.8% – the highest level since May 2021. This uptick in joblessness suggests that the economy may be feeling the strain of elevated interest rates maintained by the BoE over the past year.

​However, wage growth data told a more nuanced story. Pay excluding bonuses came in around 4.7%, while total pay growth registered approximately 5%. These figures remain elevated by historical standards, though they show signs of moderating from their recent peaks.

​The mixed nature of the data creates a challenging environment for policymakers. While rising unemployment typically argues for looser monetary policy, persistent wage growth raises concerns about embedded inflationary pressures. The BoE must balance these competing signals when setting future policy.

​Silver surges to record highs amid short squeeze

Silver staged a dramatic rally, briefly touching a record high near $53.55 an ounce in what traders described as a historic short squeeze. The precious metal's surge extended the safe-haven momentum that has characterised commodity markets in recent weeks amid elevated geopolitical and economic uncertainty.

​Short squeezes occur when investors betting on price declines are forced to close their positions by buying the asset, creating a self-reinforcing upward spiral. Silver's relatively smaller market compared to gold can amplify such moves, leading to explosive price action when positioning becomes one-sided.

​The rally in silver also reflects broader concerns about global economic stability and inflation expectations. Precious metals often attract investor interest during periods of market stress, serving as portfolio hedges against currency debasement and geopolitical risk.

​Mining sector faces headwinds from commodity price weakness

​The FTSE' mining contingent suffered notable declines as base metal prices weakened, particularly copper and iron ore. This copper price pressure weighed heavily on the sector's major players, with Anglo American, Glencore and Antofagasta all registering losses during the session.

​Rio Tinto provided a quarterly update showing copper output rose 10% year-on-year (YoY), demonstrating operational strength. However, the company's shares eased in London trading as falling iron ore prices and lingering trade concerns overshadowed the positive production figures.

​The weakness in base metals reflects broader concerns about global economic growth, particularly in China, which remains the world's largest consumer of industrial commodities. Any signs of weakening Chinese demand can have outsized impacts on commodity prices and mining company valuations.

​Company updates: winners and losers

​Several UK companies moved sharply on corporate news and trading updates. Robert Walters, Mitie, Hollywood Bowl and Bellway all advanced following positive updates, demonstrating that company-specific factors can still drive performance even in a challenging market environment.

easyJet shares jumped as much as 11% after Italian media reported possible interest from MSC, though both parties subsequently denied the speculation. The move highlights how merger and acquisition chatter can generate significant volatility in individual stocks, regardless of whether deals ultimately materialise.

​Bytes Technology fell on concerns about its results, while Close Brothers lifted its motor-finance provision to approximately £300 million and announced plans to challenge Financial Conduct Authority proposals. These developments underscore the ongoing regulatory challenges facing UK financial services firms.

​European markets soften on trade concerns

​European equity markets edged lower as renewed US-China trade worries dampened investor sentiment across the continent. The automotive sector faced particular pressure following Michelin's profit warning, which raised concerns about weakening demand and margin pressures in the industry.

​Mining stocks across Europe mirrored their UK counterparts' weakness, reflecting the global nature of commodity markets. When base metal prices decline, mining companies worldwide typically feel the impact regardless of their domicile or primary listing location.