The FTSE 100 fell on Thursday as a global government bond selloff pushed the UK 30-year gilt yield to 6%, its highest level since February 1998.
The index was down 1.85% as of 08:00 GMT. Elsewhere in Europe, Germany’s DAX declined 1.33% and France’s CAC 40 fell 1.46%, while sterling weakened 0.24% against the US dollar to $1.3234.
The increase in UK borrowing costs followed Tuesday’s syndication of new 10-year benchmark government bonds, which were priced to offer the highest yield for an issue of that maturity since 1999.
US government bond yields also moved higher, with the 10-year Treasury yield reaching 5.306% on Wednesday amid investor attention on inflation, fiscal deficits and government bond supply.
Bond Yields Remain in Focus
Jefferies strategist Mohit Kumar said rates “continued to be the main market driver”, with the US 10-year Treasury yield moving above 5.30%.
US core personal consumption expenditures inflation increased 0.2% in August, below forecasts, although Kumar said methodological changes accounted for most of the decline.
Kumar expects “just one more hike, likely in December” from the US Federal Reserve.
In Europe, the spread between French and German government bond yields approached 130 basis points.
Strait of Hormuz Traffic Recovers
Investors also continued to monitor developments involving Iran and the Strait of Hormuz, where traffic has recovered to nearly 80% of pre-war levels according to some estimates.
US President Donald Trump told reporters the choice was a deal with Iran or to “blow them up”, while Defense Secretary Pete Hegseth said US forces had “destroyed” Iran’s military capacity.
Axios reported that Secretary of State Marco Rubio had ordered Iran’s delegation to leave after talks collapsed. Iran’s mission to the United Nations disputed the report, calling it “baseless” and saying its delegation departed New York on Monday as scheduled.
UK Prime Minister Andy Burnham separately told the BBC there were “strong indications that Iran played a part” in an alleged plot at RAF Fairford.
UK House Price Growth Slows
UK house price growth slowed to a nine-month low in September, according to mortgage lender Nationwide.
Annual house price growth eased to 0.8% from 1.6% in August, while prices declined 0.2% month-on-month. Nationwide reported weaker regional growth across most of the country.
The UK September manufacturing purchasing managers’ index is due later on Thursday.
In company news, Micron reported results following Wednesday’s US market close, with Jefferies pointing to the results in relation to demand associated with artificial intelligence.
Oil and Gold Prices Rise
Brent crude futures increased 1.4% to $99.44 a barrel, while US West Texas Intermediate crude gained 1.35% to $91.64.
Gold futures rose 0.25% to $4,196 an ounce, while spot gold increased 0.22% to $4,165.95.
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