Falling stock prices in London due to rising gilt rates

LSEG

London’s FTSE indexes experienced a decline on Tuesday, driven by escalating tensions in the Middle East that contributed to an increase in global bond yields amid inflation apprehensions. In contrast, Reckitt Benckiser saw gains following a favourable ruling from a U.S. court regarding a baby formula case.

The export-focused FTSE 100 index dropped 1% to a two-week low of 10,725.6 points by 1019, while the domestically-focused FTSE 250 declined 1.9% and was shy of a one-month low. The midcap index appeared poised to register its most significant single-day decline since March.

  • The U.S. and Iran engaged in renewed hostilities, resulting in Brent crude prices exceeding $92 a barrel and triggering a global bond selloff as investors contemplated the implications for the world economy.
  • The yield on the UK 10-year Gilt reached its highest level since 2008, as investors anticipate the Bank of England will raise interest rates by a minimum of 32 basis points by the end of the year, an increase from approximately 24 basis points the previous week, according to LSEG-compiled data.
  • Rate-sensitive sectors experienced significant impact. Banking stocks such as Barclays fell 3.4%, Standard Chartered dropped 1.4%, and Prudential lost 1.3%.
  • Housing goods and home construction fell 3.3%, while precious metal miners tanked 7.1% and led sectoral losses, tracking lower precious metal prices in the face of rising yields.
  • On the data front, house prices rose in August, according to mortgage lender Nationwide Building Society, reflecting demand that remained resilient despite an uncertain economic outlook.
  • On the flip side, energy stocks BP and Shell rose 3.9% and 1.6%, respectively, tracking higher crude prices.
  • Reckitt Benckiser experienced a 4.4% increase following a favourable ruling from a U.S. jury in a trial concerning allegations that the company did not adequately warn consumers about the potential risk of a severe bowel disease associated with its products for premature infants.
  • Bodycote opened new tab jumped 4.1% after U.S.-based private equity firm Veritas Capital agreed to buy the thermal processing services company in a £1.85 billion ($2.51 billion) deal.
  • WPP opened a new tab and experienced a decline of 2.5% following a report indicating that the advertising company plans to reduce its workforce by up to 1,000 positions by the end of the year.