2nd Sep 2025 12:00
(Alliance News) - European blue chips continued fall at midday on Tuesday, as UK government bond yields reach a nearly 30-year high and the pound appears set for its largest single-day fall since April's US tariff announcement.
The FTSE 100 index was down 37.29 points, 0.4%, at 9,159.05. The FTSE 250 was down 344.91 points, 1.6%, at 21,288.78, and the AIM All-Share was down 4.40 points, 0.6%, at 764.24.
The Cboe UK 100 was down 0.3% at 918.71, the Cboe UK 250 was down 1.8% at 18,638.80, and the Cboe Small Companies was down 0.5% at 17,170.20.
"European equities are under heavy pressure this morning, with the DAX down around 1% as risk sentiment sours. This follows a two-week period of weakness in European stocks, as traders grow increasingly cautious that September could once again bring profit taking and selling pressure. Investors are finding little reason to chase stocks higher when bond markets continue to promote the need for caution," commented Rostro analyst Joshua Mahony.
In European equities on Tuesday, the CAC 40 in Paris faded 0.1%, while the DAX 40 in Frankfurt fell 1.3%.
Britain's long-term government borrowing costs have been sent soaring to a 27-year high, ramping up pressure on Chancellor Rachel Reeves to calm fears over the UK's public finances ahead of the autumn budget.
The yield on UK government bonds – also known as gilts – jumped to the highest level since 1998, at 5.698%, meaning it costs more for the government to borrow from financial markets. Gilt yields move counter to the value of the bonds, meaning their prices fall when yields rise.
Bond yields also soared across Europe. In Germany, the 10-year bond climbed 4 bps to 2.78%, while in France, the 10-year bond yield widened to 3.58%, up 5 basis points. The yield on 30-year government bonds topped 4.5% in France, a 14-year high. In Italy, the 10-year bond yield increased 5 bps to 3.68%.
Simultaneously, as the bond sell-off intensified, the pound is on course for the biggest single-day fall since April, when US President Donald Trump's announcement of country-specific tariffs spooked international markets.
The pound was quoted lower at USD1.3389 at midday on Tuesday in London, compared to USD1.3548 at the equities close on Monday. The euro stood lower at USD1.1630, against USD1.1705. Against the yen, the dollar was trading up at JPY148.61 compared to JPY147.27.
The latest spike in gilts comes after Prime Minister Keir Starmer announced a major shake-up of his Downing Street operation after a challenging summer for the government.
Neil Wilson, UK investor strategist at Saxo Markets, said: "The market move was a sign that investors do not have confidence the Treasury will stick to its strict borrowing rules.
"30-year yields at their highest in almost three decades is not a good look for the Labour government, and underscores that there is little fiscal or economic credibility left."
The yield on the US 10-year Treasury was quoted at 4.28%, widening from 4.23%. The yield on the US 30-year Treasury was quoted at 4.98%, stretching from 4.93%.
Stocks in New York were called lower. The Dow Jones Industrial Average was called down 0.5%, the S&P 500 index 0.6% lower, and the Nasdaq Composite down 0.8%.
Ithaca Energy led the FTSE 250 laggers around midday, sinking 11% as two of its leading shareholders sold a 3% stake in the firm.
Peel Hunt confirmed DKL Energy, a wholly owned subsidiary of Delek Group, and Eni UK, an indirect wholly owned subsidiary of Eni, offloaded 49.6 million shares. They were placed by Peel Hunt in accelerated bookbuild to institutional investors at a price of 213.75 pence per share for a value of GBP106.0 million.
On completion of the placing, Delek will hold a 50.5% stake in Ithaca, and Eni a 35.9% holding.
Fiinu faded 9.0%.
The Weybridge, Surrey financial technology provider intends to raise up to GBP1.4 million through a subscription for 9.4 million shares at 15 pence each. A "significant portion" of September's fundraise will be subscribed by Luxembourg-based fund QVP, Fiinu said.
The issue price represents a 50% premium to the subscription announced at the beginning of August, which was connected to Fiinu's reverse takeover of Everfex.
At the other end, Tertiary Minerals jumped 20%.
The mineral development company focused on deposits in the US, Zambia and northern Europe said results from its phase 2 drill programme at Target A1 at its Mushima North project have extended the footprint of thick, near surface intervals of surface mineralisation, with lower grade copper and zinc, by a further 225 metres to the north.
Mineralisation remains open to the north and at depth, it added.
Brent oil was quoted at USD69.35 a barrel at midday in London on Tuesday, up from USD68.63 late Monday.
Gold was quoted higher at USD3,481.67 an ounce against USD3,476.94.
"Once again in 2025 gold prices have hit new record highs – reflecting the uncertain and volatile backdrop seen this year," commented AJ Bell's Russ Mould. "Gold reached USD3,508 per ounce."
Among the factors behind the price surge, Mould noted "reduced appetite for other traditional safe havens, including US government debt. This reflects investor concern about the size of the country's deficit and the credibility of the current trade policy. Weakness in the US dollar is another tailwind given gold is denominated in dollars.
"At the same time, geopolitical concerns remain relevant given the ongoing conflicts in the Middle East and in Ukraine. A looming interest rate cut in the US is another positive for gold given one of its drawbacks as an asset class is a lack of income."
Still to come on Tuesday's economic calendar, US manufacturing PMI data.
By Emily Parsons, Alliance News reporter
Comments and questions to [email protected]
Copyright 2025 Alliance News Ltd. All Rights Reserved.
Related Shares:
Ithaca EnergyFiinu