London close: FTSE falls amid US bond selloff

(Sharecast News) - London stocks fell on Thursday - albeit less than their European peers - amid a selloff in US bond markets and as oil prices shot higher, with all eyes on a meeting between US President Trump and China's Xi Jinping.

The FTSE 100 closed down 0.2% at 10,679.99, while Brent crude was up 4.7% at $107.88 a barrel and West Texas Intermediate was 4.5% higher at $96.32.

Sentiment took a hit from a bond selloff on Wall Street, sparked by a survey on Wednesday showing that US business activity unexpectedly rose to a five-year high in September, lifting rate hike bets. S&P Global's flash US Composite PMI output index rose to 58.4 from 56.0 in August. This marked the highest reading since July 2021.

Dan Coatsworth, head of markets at AJ Bell, said "The continued ascent in US borrowing costs is causing jitters on the markets.

"The US 30-year Treasury yield hit 5.447%, the highest level since 2004, with investors focused on inflationary pressures as oil remains stubbornly above $100 a barrel. The black stuff jumped 2.6% to nearly $106 a barrel.

"Bond investors are grumpy at the prospect of interest rates going higher, so they're voting with their feet and selling existing bonds. As prices fall, yields rise, which reflects the higher return investors now demand.

"It's not simply what's happening on the oil market. Bond investors have also got the hump over high levels of government borrowing, persistent deficits, and a heavy pipeline of new bond issuance.

"The cost of servicing debt is rising, yet governments continue to add to their borrowing needs. That combination is making investors increasingly nervous. Bond vigilantes are out in force, signalling that they want greater fiscal discipline and higher compensation for lending money.

"High bond yields normally create headwinds for equities. High yields make bonds more competitive against shares, reduce the present value of future profits, can lead to a rise in corporate borrowing costs, and they can push up mortgage rates.

"That's a not great situation if you're heavily invested in shares, yet the stock market hasn't experienced a sharp correction today. Instead, we're simply seeing minor pullbacks as equity investors remain comforted by decent corporate earnings growth, potentially taking the view that oil price pressures are only temporary."

Coatsworth said the FTSE 100 showed resilience as it benefited from strength in energy, consumer non-cyclical, healthcare, real estate and utility stocks. "These more than offset weakness in industrials, miners, consumer cyclicals and financials," he said.

"The top risers of the FTSE 100 told a clear story - investors want a mixture of oil stocks to benefit from higher energy prices, and they want to own brands the public repeatedly buys from. Think big brands like Marks & Spencer and Sainsbury's for food and clothing, BT for broadband, and British American Tobacco for vapes and cigarettes. It's a classic investor mentality of mixing obvious market winners in the current environment with names they believe will ride out any difficult times."

Investors were also eyeing a meeting in Washington between US President Donald Trump and China's Xi Jinping, after US Treasury Secretary Scott Bessent said on Wednesday that the two nations had agreed to extend their trade truce by two months. The truce had been due to expire on 10 November.

In equity markets, Ithaca Energy, BP, Shell and Harbour Energy all gushed higher in tandem with oil prices.

JD Sports bounced back from heavy losses a day earlier, when it posted a slide in half-year earnings and warned that the tough conditions seen in the first half were set to continue.

Raspberry Pi surged as lifted its full-year profit outlook and hailed a record first-half performance, pointing to strong OEM and reseller demand and increased unit shipments.

Halma gained as it boosted its full-year targets following a robust first half.

On the downside, Standard Life, St James's Place and Investec all lost ground, with the financial sector under pressure as the global bond selloff pushed yields sharply higher, weighing on life insurers and asset managers.

Victrex slid after the high-performance polymers specialist underwhelmed with a new five-year transformation strategy and capital allocation policy.

Housebuilder Vistry slumped as it unveiled heavy interim losses and trimmed its full-year profit guidance, as it launched a major overhaul of the business.

AO World was also under pressure, with investors seemingly disappointed that the online electricals retailer didn't upgrade guidance, while B&Q and Castorama owner Kingfisher was knocked lower by a downgrade to 'hold' from 'buy' at Investec.

Market Movers

FTSE 100 (UKX) 10,679.99 -0.24%

FTSE 250 (MCX) 24,154.32 -0.85%

techMARK (TASX) 6,135.69 -0.24%

FTSE 100 - Risers

JD Sports Fashion (JD.) 76.44p 2.99%

BP (BP.) 571.80p 2.51%

Ithaca Energy (ITH) 296.00p 2.00%

Shell (SHEL) 3,641.00p 1.70%

Diageo (DGE) 1,642.50p 1.36%

Bunzl (BNZL) 2,688.00p 1.36%

Tesco (TSCO) 477.00p 1.25%

Diploma (DPLM) 7,715.00p 1.25%

British American Tobacco (BATS) 4,243.00p 1.07%

Haleon (HLN) 344.90p 0.97%

FTSE 100 - Fallers

Computacenter (CCC) 5,240.00p -4.38%

Rentokil Initial (RTO) 309.20p -4.30%

Standard Life (SDLF) 887.00p -4.21%

Compass Group 11 (CPG) 29.12p -3.58%

Kingfisher (KGF) 328.20p -3.19%

ICG (ICG) 1,842.00p -3.05%

St James's Place (STJ) 1,064.50p -2.96%

Investec (INVP) 618.00p -2.75%

Weir (WEIR) 2,620.00p -2.53%

Airtel Africa (AAF) 302.60p -2.45%

FTSE 250 - Risers

Raspberry PI Holdings (RPI) 755.00p 19.56%

Telecom Plus (TEP) 812.00p 2.78%

Harbour Energy (HBR) 280.60p 2.56%

Hikma Pharmaceuticals (HIK) 1,625.00p 1.88%

FirstGroup (FGP) 175.10p 1.57%

Premier Foods (PFD) 194.50p 1.41%

Cranswick (CWK) 5,080.00p 1.40%

Mony Group (MONY) 179.70p 1.35%

Oxford Biomedica (OXB) 490.00p 1.34%

Hammerson (HMSO) 347.00p 1.34%

FTSE 250 - Fallers

Ceres Power Holdings (CWR) 388.60p -10.50%

Victrex plc (VCT) 878.00p -10.41%

Pan African Resources (PAF) 120.90p -6.42%

CVS Group (CVSG) 1,221.00p -6.22%

PPHE Hotel Group Ltd (PPH) 1,470.00p -4.92%

AO World (AO.) 88.80p -4.52%

Rightmove (RMV) 448.00p -4.27%

Rank Group (RNK) 75.80p -4.17%

Hochschild Mining (HOC) 558.50p -3.87%

RHI Magnesita N.V. (DI) (RHIM) 2,810.00p -3.27%