London midday: FTSE stays down amid global bond selloff

(Sharecast News) - London stocks were still firmly in the red by midday on Thursday as worries about inflation dented sentiment amid a selloff in global bond markets and rising oil prices.

The FTSE 100 was down 1.6% at 10,440.72, as the UK 30-year gilt yield hit 6% for the first time since 1998. Brent crude was up 2.1% at $100.07 a barrel, while West Texas Intermediate was 1.4% higher at $91.70.

Russ Mould, investment director at AJ Bell, said: "A renewed uplift in oil prices and bond yields put European stocks under pressure.

"While there are signs that an increased flow of oil is getting through the Strait of Hormuz, Brent crude hovered around $100 per barrel on the continuing war of words between the US and Iran.

"Despite US inflation data which came in softer than anticipated yesterday, government bonds continued to sell off, revealing significant twitchiness among investors. The yield on US 10-year Treasuries hit its highest level since the launch of American Idol in 2002.

"The 30-year gilt passed above 6% for the first time since January 1998, sending alarm bells ringing. Prime Minister Andy Burnham and Chancellor John Healey already have enough on their plate without a rapid increase in government borrowing costs since they took office. Gilt yields moving at such a pace presents a major challenge for their spending and borrowing plans."

Meanwhile, a survey out earlier showed that UK factory output growth eased again in September, although overall activity across the manufacturing sector grew a little.

The S&P Global manufacturing purchasing managers' index rose to 51.9 from 51.7 in August. A reading above 50.0 indicates expansion, while a reading below signals contraction. The PMI has now signalled expansion in each of the past 11 months.

Output growth, however, was the weakest in six months, with orders and exports growing only modestly. Rob Dobson, director at S&P Global Market Intelligence, said slower demand growth was to be expected given the higher energy prices seen during the month.

S&P said supply chains remained under "noticeable" stress in September, with a marked increase in average vendor delivery times. Supplier performance deteriorated to the greatest extent since June, reflecting the impacts of port congestion - both domestic and international - shipping delays, geopolitical tensions and the resulting raw material shortages.

Stretched supply chains also exerted upward pressure on purchasing costs, with the rate of input price inflation accelerating for the first time in four months amid reports of higher costs for chemicals, electronics, energy and food stuffs.

Dobson said: "The big shift in September was in the survey's price measures, which switched from signalling a decline in inflationary pressures to a renewed uplift. After hitting conflict-driven highs earlier in the year, rates of increase in both input costs and factory gate selling prices accelerated for the first time since May. Energy and electronics prices remain especially elevated, while supply disruptions and rising diesel prices are now hitting transportation costs across industry. These price moves will be closely watched by the Bank of England for any signs of a more sustained and broader price uplift potentially taking hold.

"There are still some positive shoots of growth looking ahead, however, as manufacturers remain generally positive about the outlook. Almost half expect output to rise over the coming year. Confidence nevertheless remains subdued compared to that seen prior to the outbreak of the war in the Middle East, dampened not only by geopolitical issues but also reflecting uncertainty over policy direction at home. The upcoming Budget will therefore likely prove material in steering confidence."

Elsewhere, figures from Nationwide showed that house price growth slowed sharply in September amid mounting economic and geopolitical tensions.

In equity markets, ex-dividend stocks proved a drag, with Weir, British American Tobacco, Breedon and TP ICAP all weaker. Breedon was also in focus as it announced the appointment of James Brotherton as its new chief executive with effect from 1 January 2027.

SSE reversed earlier gains to trade a little lower as it reiterated its guidance.

In broker note action, Babcock was downgraded to 'neutral' at Bank of America, while Greggs was upgraded to 'buy' from 'hold' at Panmure.

Market Movers

FTSE 100 (UKX) 10,440.72 -1.56%

FTSE 250 (MCX) 24,243.94 -1.21%

techMARK (TASX) 6,125.96 -0.84%

FTSE 100 - Risers

Rolls-Royce Holdings (RR.) 1,482.20p 1.33%

Halma (HLMA) 3,512.00p 0.40%

Vodafone Group (VOD) 123.10p 0.20%

WPP (WPP) 376.20p 0.08%

Computacenter (CCC) 5,395.00p 0.00%

Intertek Group (ITRK) 5,870.00p 0.00%

RELX FINANCE BV 3.375% GTD NTS 20/03/33 (BW73) 98.64p 0.00%

DCC Energy (DCC) 6,430.00p 0.00%

Land Securities Group (LAND) 625.00p -0.08%

Tesco (TSCO) 468.50p -0.17%

FTSE 100 - Fallers

Games Workshop Group (GAW) 17,150.00p -4.24%

Lion Finance Group (BGEO) 13,810.00p -3.90%

Weir (WEIR) 2,618.00p -3.18%

British American Tobacco (BATS) 4,006.00p -3.10%

HSBC Holdings (HSBA) 1,454.00p -2.99%

Standard Chartered (STAN) 2,241.00p -2.86%

NATWEST GROUP (NWG) 669.00p -2.82%

Reckitt Benckiser Group (RKT) 4,918.00p -2.70%

IG Group Holdings (IGG) 1,292.00p -2.57%

M&G (MNG) 312.90p -2.50%

FTSE 250 - Risers

Foresight Group Holdings Limited NPV (FSG) 462.00p 2.90%

Harbour Energy (HBR) 269.00p 2.05%

Pan African Resources (PAF) 120.50p 1.69%

Genus (GNS) 2,176.00p 1.49%

Globaldata (DATA) 59.50p 1.36%

Michael Page (PAGE) 212.00p 1.34%

Hansa Investment Company Limited (DI) (HAN) 336.00p 1.20%

ASOS (ASC) 505.00p 1.00%

Volex (VLX) 654.00p 0.93%

Schroder Asia Pacific Fund (SDP) 849.00p 0.83%

FTSE 250 - Fallers

TP Icap Group (TCAP) 325.00p -5.03%

Barr (A.G.) (BAG) 552.00p -4.17%

Vistry Group (VTY) 247.40p -4.11%

Breedon Group (BREE) 315.40p -3.96%

Wickes Group (WIX) 200.00p -3.61%

Zigup (ZIG) 455.50p -3.60%

Greggs (GRG) 1,956.00p -3.50%

Berkeley Group Holdings (The) (BKG) 3,228.00p -3.41%

Morgan Sindall Group (MGNS) 4,192.00p -3.32%

Savills (SVS) 1,002.00p -3.28%