GLOBAL MARKETS-Sterling spooked by UK inflation surprise, oil jumps on Venezuela blockade

By Marc Jones

LONDON, Dec 17 (Reuters) - Britain's pound tumbled on Wednesday as weak inflation data cemented UK interest rate cut bets, while oil snapped out of its recent slide after U.S. President Donald Trump ordered a blockade of sanctioned oil tankers in and out of Venezuela.

Europe had a lively start, with soft UK CPI figures leaving money markets in no doubt the Bank of England would cut rates on Thursday, driving the pound 0.7% lower against the dollar GBP= and helping lift the FTSE 100 .FTSE to a one-month high. .EUFRX/

European commodity-linked stocks also traded up, with energy firms .SXEP jumping 1.2%, tracking a rise in crude prices and miners .SXPP up almost 1% as silver XAG= hit another record high and platinum XPT= continued to soar. MET/L

"The (UK) data obviously reinforces the prospect of a more unified BoE cut tomorrow," MUFG's Derek Halpenny said.

With the jobs market also looking weaker, Halpenny said "there is a real and obvious need for rate cuts now", adding: "Not only tomorrow, but also in February", which he pointed out was not yet fully priced into markets.

OIL JUMPS ON TRUMP WARNING

Trump's Venezuela oil embargo warnings pushed Brent crude futures LCOc1 up 1.8% and back to $60 a barrel in London.

That, however, comes after a 5% slide this week as the prospect of a Russia-Ukraine peace deal - and potentially an easing of Russian oil sanctions - appears to have strengthened.

In the broader market, the big global stocks indices .MIWD00000PUS were mixed as investors mostly looked past Tuesday's U.S. nonfarm payrolls report.

While jobs growth rebounded more than expected in November following its biggest drop in nearly five years in October, the unemployment rate rose to 4.6%, the highest in more than four years, although analysts did not want to read to much into it given the lengthy recent U.S. government shutdown.

"Associated data collection issues will leave many sceptical about reading too deeply into these latest jobs figures," said Nick Rees, head of macro research at Monex Europe.

"Nevertheless, we still think the overall takeaway remains a sense that the U.S. labour market is softening at a faster rate than policymakers had anticipated, even if there is room to question just how worrying this weakness really is."

Overnight, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS had gained 0.35%, with Japan's Nikkei .N225 closing up a similar amount too in Tokyo. .T

Wall Street futures ESc1, NQc1 also pointed to a slightly higher restart for the S&P 500, Dow Jones and Nasdaq when U.S, trading resumes later.

Fed funds futures suggest markets are still pricing in roughly two U.S. rate cuts next year, with the latest labour market reading doing little to shift expectations. 0#USDIRPR

The next key data point for investors will be Thursday's release of the U.S. November inflation report.

Benchmark 10-year U.S. Treasuries yields US10YT=RR were up 0.5 basis points at 4.15% ahead of that in Europe after falling 3.5 basis points on Tuesday following the payrolls data.

Germany’s 10-year yields DE10YT=RR, the euro area’s benchmark, dipped 1.5 basis points to 2.83% while the UK's weak inflation numbers sent gilt yields GB10YT=RR down 5 basis points to 4.46%

"For now, our base case remains two 25-bps (U.S) rate cuts in the first half of next year at the March and June FOMC meetings, with the risks skewed toward more rather than fewer cuts in 2026," economists at Wells Fargo said in a note.

CENTRAL FOCUS

It will not only be the Bank of England in the spotlight on Thursday. The European Central Bank holds a meeting the same day where it is expected to keep its rates steady, while investors are wagering Japan's central bank will hike its rates.

The yen JPY= had fallen 0.25% to 155.10 per dollar in Asia, however, as it continued to be weighed down by domestic fiscal worries.

Total spending in Japan's draft budget for fiscal 2026 will likely exceed 120 trillion yen ($773.74 billion) to hit a new record which would top the 115 trillion-yen annual budget for the current fiscal year, Reuters reported on Tuesday.

Japanese government bonds also came under selling pressure, with the 10-year yield JP10YTN=JBTC hitting an 18-year high of 1.98% on Wednesday. Bond yields move inversely to prices. JP/

Elsewhere, silver XAG= jumped past the $65-per-ounce mark for the first time, platinum XPT= leapt 4% having almost doubled in price since April, while gold XAU= rose 0.3% to $4,317 an ounce. GOL/

($1 = 155.0900 yen)