1st Sep 2026 12:13
(Alliance News) - Stock prices in London were sharply lower at midday on Tuesday, as a global bond sell-off pushed long-term UK borrowing costs to a 28-year high, while rising oil prices and concerns over inflation added to investor unease.
The FTSE 100 index was down 99.76 points, 0.9%, at 10,724.50. The FTSE 250 was down 472.84 points, 1.9%, at 24,465.95, and the AIM all-share was down 14.14 points, 1.7%, at 797.04.
The Cboe UK 100 was down 0.8% at 1,065.93, the Cboe UK 250 was down 1.9% at 21,266.32, and the Cboe small companies was down 0.7% at 18,943.95.
UK government borrowing costs surged as part of a widespread global bond sell-off, adding pressure on Prime Minister Andy Burnham's government ahead of next month's budget.
The yield on 30-year UK government bonds, or gilts, jumped 10 basis points to 5.89% on Tuesday morning, its highest level since March 1998.
The yield on the benchmark 10-year gilt also moved sharply higher, reaching 5.223%, its highest level since June 2008, at the height of the financial crisis.
Higher gilt yields increase the government's cost of borrowing, adding to the fiscal challenge facing Burnham and Chancellor John Healey ahead of the budget.
The bond sell-off came amid concerns over rising oil prices and the outlook for inflation.
In European equities on Tuesday, the CAC 40 in Paris was down 0.2%, while the DAX 40 in Frankfurt was down 1.0%.
Eurostat showed that inflation in the eurozone accelerated in August, while unemployment was higher than expected in July.
Consumer prices rose 3.3% annually in August, in line with market expectations but accelerating from 2.9% in July. This was the highest annual inflation rate since September 2023, when it stood at 4.3%.
Energy prices jumped 14% annually in August, accelerating from 10% in July. On a monthly basis, consumer prices rose 0.4%, following a 0.2% increase in July, with energy prices up 2.9% in August, higher than July's 2.7% rise.
Meanwhile, the eurozone unemployment rate was 6.4% in July, unchanged from June's upwardly revised rate. The June reading had previously been reported at 6.3%, which was also the FXStreet-cited consensus for July.
The pound was quoted at USD1.3534 at midday on Tuesday, lower than USD1.3548 late Monday. Against the euro, sterling rose to EUR1.1676 from EUR1.1662.
The euro traded at USD1.1592 at midday on Tuesday, lower than USD1.1617 late Monday. Against the yen, the dollar was quoted at JPY160.10 versus JPY159.75.
Stocks in New York were called lower. The Dow Jones Industrial Average was called down 0.5%, the S&P 500 index down 0.5%, and the Nasdaq Composite down 1.0%.
The yield on the US 10-year Treasury was quoted at 4.79%, widening from 4.68%. The yield on the US 30-year Treasury was quoted at 5.27%, widening from 5.18%.
Brent oil was trading at USD92.05 a barrel at midday on Tuesday, higher than USD90.33 late Monday, as tensions between the US and Iran remained in focus.
US President Donald Trump threatened to hit Iran "hard" following the first exchange of fire between the two countries in more than a month.
Iranian President Masoud Pezeshkian, however, said further fighting with the US was not in his country's interest and indicated Tehran was prepared to return to a June agreement aimed at ending the conflict.
Oil majors in London were supported by the rise in crude prices, with BP up 4.2% and Shell up 1.7%.
Gold was quoted at USD4,377.60 an ounce at midday on Tuesday, down from USD4,427.90 on Monday.
Miners in London were lower, tracking weaker metal prices. Endeavour Mining fell 8.3%, Fresnillo lost 6.0% and Antofagasta was down 4.5%.
At the other end of the FTSE 100, Reckitt Benckiser jumped 4.2% after saying there are currently no outstanding jury verdicts in the overall necrotising enterocolitis litigation against its baby formula division Mead Johnson, following a favourable verdict in Illinois.
The Slough, England-based consumer goods firm made the comments after a jury in the US District Court for the Northern District of Illinois voted unanimously in the company's favour in the Inman case.
This was a 'bellwether' trial among a group of cases alleging that formula for premature babies is linked to necrotising enterocolitis, a serious gastrointestinal condition that primarily affects premature infants.
Among smaller caps, East Star Resources jumped 24% after signing a binding agreement with Nova Ltd to establish a joint venture to advance its Rulikha copper project in Kazakhstan towards production at no further cost to East Star.
Meanwhile, UK manufacturing growth cooled in August, although employment increased at its fastest pace in two years.
The seasonally adjusted S&P Global UK manufacturing purchasing managers' index fell to a five-month low of 51.7 points in August from 51.9 in July, but came in above the earlier flash estimate of 51.5.
The index remained above the 50-point mark separating expansion from contraction for a tenth consecutive month.
Manufacturing output increased for a fifth successive month, albeit at its weakest pace since April, while new orders rose. New export business increased for an eighth consecutive month, supported by demand from mainland China, the US, the Middle East and western Europe.
Employment increased at the fastest pace in two years, while business confidence reached a six-month high.
Separate Bank of England figures showed UK mortgage approvals fell more sharply than expected in July.
Mortgage approvals declined to 56,100 in July from 58,200 in June, below the FXStreet-cited consensus of 59,400 and the six-month monthly average of around 60,800.
Net borrowing of mortgage debt fell around 44% to GBP4.3 billion from GBP7.7 billion in June, below the six-month average of GBP5.3 billion.
The 'effective' interest rate, the actual interest paid on newly drawn mortgages, rose to 4.45% in July from 4.35% in June.
Still to come on Tuesday's economic calendar is the US manufacturing PMI.
By Eva Castanedo, Alliance News senior economics reporter
Comments and questions to [email protected]
Copyright 2026 Alliance News Ltd. All Rights Reserved.
Related Shares:
BPShellEndeavour MiningAntofagastaFresnilloReckittEast Star Reso