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Stocks in London ended the day lower on Tuesday as sterling sank, and the bond markets promoted a cautionary outlook. The FTSE 100 index closed down 79.65 points, 0.9%, at 9,116.69. The FTSE 250 ended 470.80 points lower, 2.2%, at 21,162.89 and the AIM All-Share finished down 3.07 points, 0.4%, at 765.57. The Cboe UK 100 ended down 0.6% at 915.86, the Cboe UK 250 closed 2.3% lower at 18,540.60 and the Cboe Small Companies fell 1.2% to 17,045.65. In Europe, the CAC 40 in Paris ended down 0.7%, while the DAX 40 in Frankfurt closed 2.3% lower. ‘Investors are finding little reason to chase stocks higher when bond markets continue to promote the need for caution,’ commented Rostro analyst Joshua Mahony. The yield on UK 30-year government bonds also known as gilts jumped to the highest level since 1998, at 5.71% on Tuesday, up 7 basis points from Monday, while the yield on the shorter-dated 10-year bond stretched to 4.81%, up 6 bps. Gilt yields move counter to the value of the bonds, meaning their prices fall when yields rise. The UK was not alone, as bond yields also soared across Europe. In Germany, the 10-year bond climbed 4 bps to 2.79%, while in France, the 10-year bond yield widened to 3.59%, up 5 basis points. The yield on 30-year government bonds hit 4.50% in France, a 14-year high. In Italy, the 10-year bond yield increased 7 bps to 3.71%. The latest gains came amid political instability in France and concerns over rising government debt across Europe. Kathleen Brooks at XTB Research said a driver of weakness in the UK bond market could be a delayed reaction to the government reshuffle on Monday. ‘The prime minister beefed up his economic team in the lead up to the budget. This has not gone down too well, with concerns that there is still a strategy void when it comes to the economy, as the government struggles to deliver the growth that it promised,’ she said. The shake-up saw the chancellor’s deputy, Darren Jones, move into a new role as chief secretary to the UK prime minister. Starmer also brought in Minouche Shafik, a former Bank of England deputy governor, as his chief economic adviser. Treasury minister James Murray replaced Jones as Treasury chief secretary, while Chipping Barnet MP Dan Tomlinson replaced Murray as Treasury exchequer secretary. Simon French, head of economics at Panmure Liberum, said Jones and Shafik were a ‘sensible’ duo of appointments and ‘long overdue’ given the lack of economic expertise in the prime minister’s team. But he noted gilts sold off partly because Murray and Tomlinson ‘are seen as more left wing than Darren.’ Brooks at XTB notes that right now, the UK is not an ‘outlier’ as European bond yields are also moving higher. ‘A rise in UK yields always garner more attention, because our yields are at a higher level to begin with. However, if UK yields continue to rise, and if they start to rise at a faster rate than elsewhere, then it could be a sign the market is pricing in a growing probability that Rachel Reeves will throw away her fiscal rules and borrow more at the budget to fund spending, rather than increase taxes and stymie growth.’ Deutsche Bank thinks the autumn budget will be a ‘defining moment’ for the UK as the chancellor looks to fill a fiscal hole worth around £20 billion to £25 billion. ‘How the chancellor decides to fill the fiscal hole will be important,’ Deutsche said. ‘While we expect fiscal headroom to be restored, we expect the chancellor to adopt a slightly looser fiscal policy path in the near-term, compared to March, with a good chunk of fiscal consolidation likely to be backloaded,’ the bank said. The pound dropped to $1.3389 late on Tuesday afternoon in London, compared to $1.3548 at the equities close on Monday. The euro fell to $1.1659, against $1.1705. Against the yen, the dollar was trading higher at JP¥148.20 compared to JP¥147.27. In New York, the Dow Jones Industrial Average was down 1.1%, the S&P 500 fell 1.4% and the Nasdaq Composite was 1.8% lower. The yield on the US 10-year Treasury was quoted at 4.28%, widened from 4.23%. The yield on the US 30-year Treasury was quoted at 4.98%, stretched from 4.93%. On the FTSE 100, insurer Legal & General fell 4.5%, while wealth management firms Phoenix Group and St James’s Place declined 4.2% and 3.6% respectively. Rate sensitive housebuilders Persimmon and Taylor Wimpey fell 3.4% and 3.2%, with the latter not helped by a rating downgrade by Bank of America to ’neutral’ from ’buy’. Retailer Marks & Spencer tumbled 4.0% on fears consumer spending could stall amid slowing economic growth, and as house broker Shore Capital lowered earnings forecasts. Electricity generator SSE fell 3.7% which JPMorgan attributed to ‘rising UK bond yields and concerns around the company’s balance sheet’. However, JPM sees the weakness as a ‘buying opportunity’. On the FTSE 250, Ithaca Energy tumbled 13% as its two leading shareholders sold a 3% stake in the firm. Peel Hunt confirmed DKL Energy, a wholly owned subsidiary of Delek Group, and Eni UK, an indirect wholly owned subsidiary of Eni, offloaded 49.6 million shares. They were placed by Peel Hunt with institutional investors at a price of 213.75 pence per share for a value of £106.0 million. Gold hit another record high, climbing to $3,511.91 an ounce on Tuesday against $3,476.94 on Monday. UBS said elevated political and geopolitical risks underline the appeal of gold, which tends to benefit from uncertainty. ‘Gold’s status as a durable longterm portfolio diversifier is strengthening amid higher government debts, persistent inflation, geopolitical risks, and the desire of ex-G10 central banks to raise their longer-term holdings as a percentage of total reserves,’ the Swiss bank noted. A barrel of Brent traded at $68.81 late Tuesday afternoon, up from $68.63 on Monday. The biggest risers on the FTSE 100 were Fresnillo, up 94.00 pence at 1,919.00p, Endeavour Mining, up 40.00p at 2,664.00p, Unilever, up 64.00p at 4,728.00p, BP, up 3.15p at 434.20p and Haleon, up 2.50p at 363.20p. The biggest fallers on the FTSE 100 were Whitbread, down 142.00p at 2,983.00p, Legal & General, down 11.00p at 236.15p, Unite Group, down 30.50p at 674.50p, Phoenix Group, down 28.50p at 653.00p and Land Securities, down 23.00p at 529.00p. Wednesday’s local corporate calendar has half year results from wealth management firm M&G, first quarter results from equipment hire company Ashtead and a trading update from luxury goods retailer Watches of Switzerland. The global economic calendar on Wednesday has a slew of composite PMI readings, US factory goods orders data and the release of the Federal Reserve’s Beige Book. Copyright 2025 Alliance News Ltd. All Rights Reserved.
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