The FTSE 100 closed 83.19 points, or 0.8%, lower at 10,458.50 on Wednesday, as renewed selling in global bond markets and another rise in oil prices put pressure on equities.
The FTSE 250 fell 0.7% to 24,036.75, while the AIM All-Share declined 1.0% to 775.98. European markets were also firmly lower, with both France’s CAC 40 and Germany’s DAX falling around 1.4%.
UK gilt yields moved sharply higher, with the 30-year yield climbing back above 6%, while the benchmark 10-year yield rose by around 10 basis points during the session.
The sell-off came despite healthy demand at Wednesday’s UK government debt auctions, where investors reportedly submitted bids worth around four times the amount of 2028 and 2031 gilts available.
The 10-year Treasury yield reached around 5.32%, close to a 24-year high, while the 30-year yield traded near 5.69%.
Higher government bond yields increase financing costs across the economy and also make bonds more competitive with equities, placing particular pressure on highly valued shares, property companies, utilities and other rate-sensitive businesses.
European debt markets were additionally unsettled by renewed concerns over France’s fiscal position.
Bank of France Governor Emmanuel Moulin said France’s economic situation was serious as borrowing costs rise, although he said the country did not currently require intervention from the European Central Bank. He linked the widening borrowing-cost premium partly to France’s larger budget deficit and political uncertainty surrounding passage of the 2027 budget.
The single currency fell to around $1.1187, while sterling weakened to approximately $1.3210 against the dollar. The dollar benefited from its relative safe-haven status as investors reduced exposure to riskier assets.
Brent crude traded around $101.77 a barrel, up sharply from $98.37 late Tuesday, as the market remained highly sensitive to Middle East security risks and the potential for disruption to shipping and energy supplies.
The return of oil above $100 adds to the challenge facing central banks because sustained higher energy costs could keep inflation elevated even as economic growth comes under pressure.
The Dow Jones Industrial Average was down around 1.1%, the S&P 500 around 0.6% lower and the Nasdaq Composite down roughly 0.7%, retreating from Tuesday’s record highs as higher yields and oil prices triggered profit-taking.
Standard Chartered fell 4.5%, HSBC dropped 4.4%, Barclays lost 3.4% and NatWest declined 2.8%, while insurer Prudential fell 4.7%.
HSBC’s decline coincided with reports that the bank is planning substantial job reductions within its UK wealth management operation as it expands the use of artificial intelligence.
The Financial Times reported that HSBC could remove around half of management and specialist positions and as many as 70% of financial adviser roles. HSBC confirmed that it is currently conducting a consultation over proposed changes but has not disclosed the number of jobs affected.
Elsewhere, Pennon fell around 20% after announcing a heavily discounted rights issue, increased infrastructure spending and a reduction in its dividend. The water utility now plans substantially higher investment across its regulated businesses while resetting shareholder distributions to support the programme.
JD Sports rose 3.9%, while Frasers Group gained 2.8% after taking an 8.8% holding in Under Armour.
Consumer-health names also performed strongly after positive broker commentary, with Reckitt Benckiser gaining 2.6% and Haleon rising 2.5%.
Goldman Sachs upgraded Reckitt to buy and highlighted the potential for further consolidation within consumer health.
On the FTSE 250, Avon Technologies jumped around 15% after saying annual results were expected to beat market expectations.
The protective-equipment manufacturer expects its adjusted operating margin to be comfortably above its previous 14%-16% guidance range, compared with 13% last year.
Gold weakened alongside other risk-sensitive assets, falling to around $4,110 an ounce, as higher bond yields and the stronger dollar reduced the appeal of non-yielding precious metals.
Attention now turns to the Federal Reserve’s September meeting minutes, alongside Thursday’s UK corporate calendar, which includes half-year results from Tesco and a trading update from Unite Group.
For investors, Wednesday’s session reinforces the increasingly difficult macro combination facing equity markets: long-term bond yields at multi-decade highs, oil above $100 and renewed sovereign-debt concerns in Europe.
Until yields stabilise, the pressure is likely to remain greatest on financial conditions, highly leveraged companies and rate-sensitive sectors, while oil and geopolitical risk continue to complicate the inflation outlook.
