FTSE 100 slides as bond yields resume upward path
The FTSE 100 fell heavily on Friday as bond yields pushed higher amid fears that higher inflation will keep interest rates elevated.
asserted
inflation → slide → rates
The FTSE 250 fell 146.72 points, 0.6%, to 24,205.42, but the AIM all-share climbed 3.46 points, 0.4%, to 796.09.
asserted
share → fall → 796.09
Following a brief respite, bond yields climbed on Friday as investors continue to weigh the fallout from central bank interest rate decisions this week and high energy prices.
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investors → follow → decisions
The Bank of Japan on Friday followed the US Federal Reserve’s move earlier this week by hiking rates, although the Bank of England bought itself some time by holding rates on Thursday.
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Bank → follow → Thursday
The yield on the US 10-year Treasury was quoted at 5.01%, stretched from 4.95%.
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yield → quote → %
The yield on the US 30-year Treasury was quoted at 5.34%, widened from 5.30%.
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yield → quote → %
In London, the yield on 10-year gilts traded at 5.31%, up from 5.21% on Thursday.
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yield → trade → Thursday
Despite the Bank of England rate hold, analysts increasingly expect the central bank to increase rates going forward.
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bank → expect → rates
Panmure Liberum analyst Simon French moved his expectations from an unchanged UK bank rate through the next 12 months, to 25 basis point increases at both the November and February Monetary Policy Committee meetings.
“If this comes to pass the MPC will be reluctant hikers of UK interest rates, but with household energy prices on track to rise 25% in January there is a growing risk of second order impacts to consumer prices,” he said.
asserted
he → move → prices
RBC Capital Markets also changed its BoE rate call and put a 25 basis point rate hike in for the next meeting in November.
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Markets → change → November
Investors and analysts remain concerned that higher oil prices likely mean second-round effects on inflation, which could prompt a further round of interest rate increases.
uncertain
which → remain → increases
“A higher expected path for oil prices means disinflation will be slower, and more restrictive policy also weighs on growth in 2027,” Morgan Stanley pointed out.
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Stanley → expect → 2027
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Brent oil was quoted at 104.37 dollars a barrel in London on Friday, up from 103.65 dollars late on Thursday.
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oil → read → Thursday
In European equities on Friday, the Cac 40 in Paris fell 1.6%, as did the Dax 40 in Frankfurt.
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Dax → fall → Frankfurt
In New York, the Dow Jones Industrial Average was down 0.4% at the time of the closing bell in London.
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Average → close → London
The S&P 500 eased 0.1%, and the Nasdaq Composite was down slightly.
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Composite → ease → ?
Adding to the volatility, Wall Street’s trading is also taking place against the backdrop of quarterly “triple witching”, in which derivatives contracts tied to stocks, index options and futures are scheduled to mature.
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contracts → add → stocks
This can contribute to elevated volumes and increased short-term volatility as investors roll or close positions.
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investors → contribute → positions
Back in London, figures from the Office for National Statistics showed UK retail sales rebounded in August and beat expectations.
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sales → show → expectations
Retail sales volumes rose 0.5% month-on-month, reversing a 0.5% decline in July and outperforming the 0.2% fall expected by markets, according to FXStreet.
uncertain
volumes → rise → FXStreet
June’s increase was revised down to 0.6% from 0.7%.
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increase → revise → %
The pound was quoted at 1.3372 dollars on Friday, up from 1.3356 dollars at the same time on Thursday.
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pound → quote → Thursday
Against the euro, sterling firmed to 1.1661 euro from 1.1627.
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sterling → firm → 1.1627
The euro eased to 1.1466 dollars from 1.1480 dollars.
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euro → ease → dollars
Against the yen, the dollar was trading at 157.07 yen, up from 155.80 yen.
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dollar → trade → yen
The yen weakened despite the Bank of Japan raising its policy rate by 25 basis points to 1.25%, its highest level since 1995, and reiterating that it would continue lifting rates if the economy and inflation developed in line with its forecasts.
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economy → weaken → forecasts
However, the decision was opposed by two of the bank’s nine policymakers, which ING analyst Frantisek Taborsky said could make it more difficult for policymakers to agree on another hike in meetings to come.
uncertain
policymakers → oppose → meetings
Deutsche Bank described the decision as a “more dovish hike than expected”, noting that the two high-profile dissenters may point to less political support for further tightening than previously thought.
uncertain
dissenters → describe → tightening
On the FTSE 100, IG Group rose 2.1% as UBS reiterated a “buy” rating and said the shares offer “compelling” value.
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shares → rise → value
But Airtel Africa plummeted 11% after Bloomberg reported that its Airtel Money arm is considering raising at least 800 million dollars in its planned London initial public offering, substantially below the previously targeted 1.50 billion dollars to 2.00 billion dollars.
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arm → plummet → dollars
The mobile money business is also considering a valuation of 8.00 billion dollars to 9.00 billion dollars, down from the 10.00 billion dollars previously sought, following investor feedback.
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business → consider → feedback
Airtel Money could file for the IPO as early as next week and is targeting the start of trading on the London Stock Exchange in October, the report said.
uncertain
report → file → October
Retailer Next fell 4.8% on further consideration of Thursday’s results, while Ladbrokes owner Entain dropped 5.2%, ahead of its demotion to the FTSE 250.
Friday is the betting operator’s last day in the lead index, for now.
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Friday → fall → index
Glencore was also in the doldrums, down 4.0%, as the Financial Times reported that the miner has suspended one of its senior executives in the wake of the escalating scandal involving iron ore trader Radiant World.
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miner → report → World
FT sources said Peter Hill, Glencore’s head of steelmaking raw materials, has been stood down from his position pending the outcome of a review into the miner’s business with Radiant World and associated companies.
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Hill → say → World
On the FTSE 250, Harbour Energy rose 3.4% as Bank of America raised to “buy” from “neutral”, while Vistry fell back 2.7% ahead of next results and strategic review.
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Vistry → rise → results
Gold was quoted at 4,355.67 dollars an ounce on Friday, little changed from 4,356.36 dollars on Thursday.
asserted
Gold → quote → Thursday
Monday’s local corporate calendar has full year results from Craneware and Getech.
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calendar → have → Craneware
Monday’s global economic calendar has an interest rate decision in China and the Chicago Fed national activity index.
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calendar → have → China
Financial markets in Japan are closed for Respect for the Aged Day.
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markets → close → Day
The Aporia
