(Sharecast News) - London stocks had extended losses by midday on Tuesday following fresh strikes between the US and Iran, as UK borrowing costs hit their highest level since the 2008 financial crisis.
The FTSE 100 was down 0.8% at 10,740.10, while Brent crude was up 1.6% at $91.92 a barrel and West Texas Intermediate was 2.2% higher at $87.63 after the US and Iran exchanged fresh strikes for the first time since July over the weekend.
Meanwhile, the yield on the 10-year gilt was up 7 basis points at 5.22%, having hit an 18-year high, while the 30-year yield was seven basis points firmer at 5.86%, having hit a 28-year high.
Russ Mould, investment director at AJ Bell, said: "A post-UK Bank Holiday hangover looked inevitable for the FTSE 100 given the losses chalked up across Europe, Asia and the US since the end of last week.
"Government bond yields have renewed their surge as oil prices move back above $90 per barrel, bringing concerns about inflationary pressures back to the fore.
"In a familiar pattern, the hints at diplomatic progress in the Middle East last week have amounted to little as hostilities between the US and Iran instead ramp up once more.
"UK shop price inflation hitting a two-year high shows how these geopolitical ructions are feeding into a higher cost of living for UK households. Retailers, travel operators and companies with links to the global aviation sector were among those to fall in London, where the main gainers were in the energy sector."
A survey out earlier showed that growth in the UK manufacturing sector eased to a five-month low in August as growth rates in both output and new orders lost momentum.
The S&P Global manufacturing purchasing managers' index declined to 51.7 from 51.9 in July but was above the flash estimate of 51.5. The index has now registered above the 50.0 mark that separates contraction from expansion for 10 months in a row.
The survey also showed that employment rose for the fifth consecutive month and at the quickest pace for two years, while business optimism rose to a six-month high.
Separately, data from the Bank of England revealed that net mortgage approvals for house purchases declined to 56,100 - the lowest level since January 2024 - from 58,200 in June. Net borrowing of mortgage debt fell to £4.3bn in July from £7.7bn the month before.
The 'effective' interest rate - the actual interest paid - on newly drawn mortgages eased to 4.45% in July from 4.35% in June. Meanwhile, the rate on the outstanding stock of mortgages was 3.97%, up from 3.96% in June.
The report also showed that net borrowing of consumer credit by individuals rose to £2bn in July from £1.9bn the month before. Within that, net borrowing through credit cards was £0.9bn, down from £1.0bn. Net borrowing through other forms of consumer credit - such as car dealership finance and personal loans - rose to £1.1bn in July from £0.9bn a month earlier.
Data from Nationwide showed house prices returned to growth in August but remained subdued.
In equity markets, Reckitt Benckiser surged to the top of the FTSE 100 after an Illinois court ruled in favour of its Mead Johnson unit in a trial alleging that its baby formula was linked to deadly bowel disease in premature babies.
Bunzl rose after it lifted its full-year margin as it reported a rise in first-half profit and revenue, with underlying growth in all regions, and announced a new £500m share buyback. It now expects group operating margin to be broadly flat year-on-year, having previously guided to a modest decline.
Energy giants BP and Shell gushed higher in tandem with oil prices.
Bodycote jumped as it agreed to be taken over by US private equity firm Veritas Capital in a £1.65bn deal. Under the terms of the acquisition, Veritas - through its special purpose vehicle Vulcan Alpha Bidco - will pay 940p per share for Bodycote. This comprises 932.8p in cash and the FY26 interim dividend of 7.2p per share.
On the downside, precious metals miner Fresnillo tumbled as gold prices fell.
Market Movers
FTSE 100 (UKX) 10,740.10 -0.78%
FTSE 250 (MCX) 24,488.74 -1.80%
techMARK (TASX) 6,124.74 -0.89%
FTSE 100 - Risers
Reckitt Benckiser Group (RKT) 5,356.00p 4.48%
BP (BP.) 534.20p 3.79%
Airtel Africa (AAF) 340.60p 2.83%
Convatec Group (CTEC) 231.60p 1.93%
Shell (SHEL) 3,402.00p 1.66%
Tesco (TSCO) 463.50p 1.12%
Glencore (GLEN) 600.80p 0.82%
Smith & Nephew (SN.) 1,070.50p 0.61%
Sainsbury (J) (SBRY) 335.70p 0.54%
Haleon (HLN) 369.20p 0.52%
FTSE 100 - Fallers
Fresnillo (FRES) 2,989.00p -5.68%
ICG (ICG) 1,925.00p -4.37%
Autotrader Group (AUTO) 505.60p -4.13%
Melrose Industries (MRO) 493.80p -3.90%
JD Sports Fashion (JD.) 83.60p -3.62%
Rolls-Royce Holdings (RR.) 1,476.60p -3.61%
Barclays (BARC) 479.85p -3.43%
InterContinental Hotels Group (IHG) 157.50p -3.40%
Persimmon (PSN) 1,140.00p -3.31%
International Consolidated Airlines Group SA (CDI) (IAG) 424.70p -3.10%
FTSE 250 - Risers
Bodycote (BOY) 950.50p 4.16%
Drax Group (DRX) 806.00p 3.81%
Energean (ENOG) 751.50p 2.59%
Diversified Energy Company (DI) (DEC) 1,104.00p 2.03%
Ithaca Energy (ITH) 280.50p 1.92%
Harbour Energy (HBR) 254.80p 1.67%
Victrex plc (VCT) 850.00p 1.19%
SDCL Efficiency Income Trust (SEIT) 36.60p 1.10%
Elementis (ELM) 176.00p 1.03%
Lancashire Holdings Limited (LRE) 621.50p 0.89%
FTSE 250 - Fallers
Oxford Nanopore Technologies (ONT) 161.40p -8.35%
Oxford Biomedica (OXB) 471.50p -8.20%
Endeavour Mining (EDV) 4,362.00p -8.03%
Ceres Power Holdings (CWR) 362.00p -7.59%
Hochschild Mining (HOC) 618.50p -7.27%
Watches of Switzerland Group (WOSG) 673.00p -6.33%
Pan African Resources (PAF) 127.30p -6.31%
Trustpilot Group (TRST) 275.80p -5.75%
Globaldata (DATA) 79.70p -4.76%
W.A.G Payment Solutions (EWG) 99.60p -4.60%
21.93 (0.20%)
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