FTSE 100 hits three-week low as rising bond yields weigh
The FTSE 100 fell 1.5% as rising oil prices and bond yields lowered expectations for a rate cut. Airline stocks dropped while energy firms saw modest gains.
The blue-chip stock index in the United Kingdom retreated to a three-week closing low on Thursday, reversing earlier gains as rising bond yields weighed on market sentiment. The FTSE 100 fell 1.5%, marking its lowest level since February 12, while the midcap FTSE 250 index declined by 0.9%. This downturn was primarily driven by expectations that a spike in Brent Crude Oil prices, fueled by intensifying geopolitical conflicts, will trigger renewed inflationary pressures. British government bond yields saw a sharp increase as investors significantly lowered their expectations for a near-term interest rate cut by the Bank of England. Market pricing for a rate reduction this month dropped to a one-in-four chance, a steep decline from the 80% probability estimated just one week ago. This shift follows a Bank of England survey indicating that employer expectations for wage growth remained at their lowest levels in nearly four years, though other domestic data presented a mixed economic outlook. The energy sector provided a partial buffer to the broader market decline. Shares of Shell plc and BP p.l.c. both advanced by approximately 2% as oil prices climbed more than 3%. The price surge is linked to the escalating conflict involving the United States, Israel, and Iran, which has disrupted shipping routes and prompted several major Middle Eastern producers to scale back output. Conversely, the rise in energy costs weighed heavily on the aviation sector. Wizz Air Holdings Plc saw its shares tumble 11.3% after the airline projected a 50 million euro hit to its net profit resulting from the regional conflict. Other carriers also faced selling pressure, with easyJet plc falling 5% and British Airways operator IAG dropping 3.6%. In the consumer and industrial sectors, Reckitt Benckiser Group plc declined 5.8% as the company warned of a continued difficult trading environment across Europe. The housing market also showed signs of strain, with Taylor Wimpey plc losing 1.3% after forecasting lower annual profits due to build cost inflation and softer property pricing. Meanwhile, PageGroup plc plummeted 15% following a dividend cut and a significant drop in annual profit, alongside warnings of an uncertain outlook for the global jobs market. Despite the general market weakness, Rentokil Initial plc emerged as a top performer, surging 10.7% to lead the FTSE 100. The pest control specialist reported an increase in annual adjusted pretax profit, providing a rare bright spot in a day dominated by macroeconomic concerns and sector-specific headwinds.
