London’s FTSE 250 slumps and pound weakens as UK gilt yields spike
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London’s stock markets faltered on Wednesday, with the FTSE 250 slumping to a five-month low and the pound weakening as UK long-term borrowing costs continued to spike. The FTSE 100 was treading water, closing just 5.75 points, or 0.07%, higher at 8,251.03.
Meanwhile, the more domestically focused FTSE 250 tumbled 2%, as mid-cap stocks came under pressure while government borrowing costs continued to surge. A continued sell-off in the bond market saw the yield of 30-year gilts hit a peak of 5.36%, the highest level since 1998.
Investors have been reacting to concerns over the threat of stagflation and a wider global sell-off in government bonds. The cautious attitude is evident across markets, but it seems to be the UK that is bearing the brunt. Chris Beauchamp, chief market analyst for IG, said: “The mood music around the UK continues to deteriorate as 30-year gilt yields rise to their highest level in over a quarter of a century.
“Investors have come back from the festive break in a sour mood concerning the UK, and have now decided that the UK’s cheap status is not an attraction, but instead a reflection of the poor situation facing the British economy. “The cautious attitude is evident across markets, but it seems to be the UK that is bearing the brunt.”.
The value of the pound slid by 1% against the US dollar, at 1.2355, the lowest level since April last year. Sterling was also down 0.6% against the euro, at 1.199. In Paris, the Cac 40 slid 0.49% on Wednesday, and in Frankfurt, the Dax closed 0.05% lower.
