1st Oct 2026 12:20
(Alliance News) - Stocks slumped in London on Thursday, although they recouped some earlier heftier falls, as bond yields climbed to multi-decade highs amid concerns of rising inflation and interest rates.
"The bond market sell off is gathering pace and ...it could be hard for stocks to continue to rally as we move into Q4," commented Kathleen Brooks, research director at XTB.
The FTSE 100 index traded down 124.76 points, 1.2%, at 10,481.27. It sat as low as 10,390.73 earlier on Thursday.
The FTSE 250 was down 192.71 points, 0.8%, at 24,347.28, and the AIM all-share was down 3.49 points, 0.4%, at 783.91.
The Cboe UK 100 was down 1.3% at 1,040.76, the Cboe UK 250 was down 0.8% at 21,195.12, and the Cboe small companies fell 0.6% to 19,012.28.
In European equities on Thursday, the CAC 40 in Paris shed 0.8%, while the DAX 40 in Frankfurt was 0.1% lower.
The hefty stock price falls came as bond yields, which move inversely to their prices, pushed to multi-year highs.
The yield on UK 30-year gilts was quoted at 5.95%, around midday in London, after earlier breaching 6.00% for the first time since 1998.
The bond sell-off is being driven by fears of high inflation, as the Middle East conflict continues to restrict oil supplies from the region.
On Wednesday, US 10-year Treasury yields hit their highest level since 2002, and earlier Thursday Japan’s 10-year bond yield increased towards the 30-year high set in September.
The yield on the US 10-year Treasury was quoted at 5.31% early Thursday afternoon, stretched from 5.28% at the time of the London equity market close on Wednesday. The yield on the US 30-year Treasury was quoted at 5.64%, widened from 5.62%.
Susannah Streeter, chief investment strategist, Wealth Club said the bond market is adding to the pressure cooker ahead of the UK budget, due at the end of this month.
"The warning lights are flashing in a week when the government paid the highest yield on a 10-year gilt auction since 1999, underlining how much more expensive it is becoming to borrow. With debt already high and interest payments eating up a hefty chunk of public finances, sustained yields at these levels could further squeeze the Chancellor's wiggle room when he sets out his spending plans," she said.
Streeter noted markets are currently pricing in around an 84% chance of a rate hike in November, following by multiple hikes next year.
"Central bankers are expected to turn on the screws and increase the cost of borrowing to stop inflationary pressures sparked by the war with Iran rippling through the economy," she added.
The Dow Jones Industrial Average is called to open 0.1% higher, the S&P 500 0.4% to the good and the Nasdaq Composite is set to climb 0.8%.
A barrel of Brent fell to USD99.65 early Thursday afternoon from USD103.82 late Wednesday afternoon. Gold rose to USD4,172.52 an ounce from USD4,158.28.
The pound was down at USD1.3227 on Thursday from USD1.3276 at the time of the London equities close on Wednesday. Against the euro, it climbed to EUR1.1711 from EUR1.1688.
The euro fetched USD1.1292, down from USD1.1359. Against the yen, the dollar bought JPY158.15, up from JPY157.15.
In London, the threat of higher interest rates, coupled with weak housing market data, sent housebuilders Persimmon shares 2.4% lower. Barratt Redrow fell 1.8%.
House prices rose 0.8% on-year in September, cooling markedly from a 1.6% hike in August, data from mortgage lender Nationwide showed. It was the weakest rate of growth since December 2025.
RBC Capital Markets equity analyst Anthony Codling said the figures while not a "disaster", are a "reminder that the market remains a hostage to forces beyond its control: geopolitical tension in the Middle East is driving energy prices higher, keeping inflation nerves alive and mortgage rates sticky."
Codling said the good news is that the fundamentals are "quietly" improving.
"Wages are growing faster than house prices, affordability is edging in the right direction, and private sector pay has remained disciplined enough to give the Bank of England some room to breathe. The market is not broken; it is just pausing for thought," he added.
Land Securities was among a handful of blue-chip risers, up 0.1%, as it agreed a GBP516 million deal to acquire the Metrocentre in Gateshead, partially funded by a GBP500 million equity issue.
Fallers were broad-based with Games Workshop down 4.7%, engineer Weir Group down 3.7%, tobacco manufacturer British American Tobacco, down 2.9% and lender HSBC down 2.8%.
SSE was down 0.6% after stating it remains on track to meet its annual earnings guidance.
The Perth, Scotland-based electricity generator said output from its renewables business rose 20% in the half-year ended in September compared with a year earlier. The increase was driven by "more favourable weather conditions" and capacity growth, SSE said.
For the half year, SSE said it sees adjusted earnings per share of between 64 pence and 68 pence. It reiterated full-year expectations for adjusted earnings per share of between 168 pence and 193 pence, and between 225 pence and 250 pence for financial 2030.
On the FTSE 250, Entain was a bright feature, up 1.2%, as Deutsche Bank Research included it in a list of its top European stock picks for the next twelve months.
But AG Barr fell 4.2% as Berenberg downgraded the Irn-Bru owner to 'hold' from 'buy' after results earlier this week.
The broker said the results "lacked fireworks", and believes the outlook for the company remains "slightly more uncertain".
Elsewhere, Rentguarantor soared 18% as it forecast revenue, earnings before interest, tax, depreciation and amortisation will be materially above current market expectations.
It put market consensus for revenue at between GBP14 million to GBP15.1 million and Ebitda at GBP4.1 million to GBP4.9 million.
Still to come US initial jobless claims and US manufacturing PMI reports.
By Jeremy Cutler, Alliance News reporter
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PersimmonBarratt RedrowLand SecuritiesSSEWeir GroupBritish American TobaccoGames WorkshopRentguarantorEntainBarr (A.G.)