LONDON MARKET OPEN: Stocks slump as bond sell-off escalates

(Alliance News) - Stock prices in Europe opened lower on Thursday, with barely a handful of the FTSE 100 in the green, as lofty government bond yields continue to weigh on investor enthusiasm, despite cooler-than-expected US inflation data on Wednesday.

The FTSE 100 index plunged 184.54 points, 1.7%, at 10,421.46. The FTSE 250 slumped 351.25 points, 1.4%, at 24,188.74, and the AIM all-share fell 4.44 points, 0.6%, at 782.96.

The Cboe UK 100 fell 1.9% at 1,033.86, the Cboe UK 250 slumped 1.5% at 21,055.20, and the Cboe small companies was down 0.2% at 19,077.60.

In European equities on Thursday, the CAC 40 in Paris and the DAX 40 in Frankfurt each slumped 1.3%.

Sterling declined to USD1.3234 early Thursday, from USD1.3276 late Wednesday afternoon. Against the euro, it bought EUR1.1698, up from EUR1.1688.

The single currency fell to USD1.1310 from USD1.1359. Against the yen, the dollar shot up to JPY158.21 from JPY157.15.

In the US on Wednesday, the performance on Wall Street was mixed, with the Dow Jones Industrial Average down 0.9%, the S&P 500 down 0.3% and the Nasdaq Composite up 0.2%.

"In terms of the last 24 hours, it was a difficult session for investors to grapple with, as multiple trends all hit at once. On the bright side, downward revisions to the US PCE inflation data pushed back on speculation the Fed would hike this month. That had helped equities recover for most of the session but a late month-end sell-off left the S&P 0.25% lower at the close," analysts at Deutsche Bank commented.

But things were more inflationary elsewhere, Deutsche Bank analysts noted, as the Brent price rose.

"There wasn't a single catalyst for that, but the moves came amidst growing scepticism that the US and Iran would reach a deal anytime soon," Deutsche analysts said.

Brent has since declined early on Thursday to below the USD100 a barrel mark, due to the month-end change in the oil benchmark.

Brent faded to USD99.39 a barrel early Thursday, from USD103.82 late Wednesday afternoon. Gold traded at USD4,161.72 an ounce, up slightly from USD4,158.28.

The yield on the US 10-year Treasury was quoted at 5.34% on Thursday morning, widening from 5.28% at the time of the London equities close on Wednesday. The yield on the US 30-year Treasury was loftier at 5.68% from 5.62%.

Both hit their highest levels since 2002.

Away from Treasuries, Japanese government bond yields remain elevated, though that did not prevent the Nikkei 225 from surging. The Nikkei jumped 3.3% on Thursday.

Bond market angst is also providing an unfavourable backdrop in the lead up to this month's UK budget, the first under the new government. The UK 10 year gilt hit 5.50%, while the 30-year topped 6.00%.

Wealth Club analyst Susannah Streeter commented: "The bond market is adding to the pressure cooker ahead of the UK budget, with the 10-year gilt yield climbing to around 5.49%, the highest level since July 2007. 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."

Bond market angst, coupled with tepid housing market data, sent Persimmon shares 3.1% lower. Barratt Redrow fell 3.0%.

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.

The S&P/ASX 200 in Sydney ended down 2.0%. Financial markets in Shanghai and Hong Kong were closed on Thursday.

In London, Rolls-Royce rose 0.5%, the jet engine maker was the best FTSE 100 performer. It was among only four to trade higher shortly after the opening bell, with DCC Energy, Polar Capital Technology Trust and easyJet also registering minor gains.

SSE fell 1.0%. It is on track to meet annual earnings guidance and the electricity generator hailed continued "strong delivery" in its network.

For the half-year ended September, SSE said renewables output is up around 20% year-on-year due to "more favourable weather conditions".

It sees adjusted earnings per share between 64 pence and 68p. It is an outcome that reflects a "lower level of seasonality compared to prior years given an increasing proportion of earnings being generated from regulated networks".

It is on track for an adjusted EPS between 168 and 193p for the full year.

Filtronic rose 8.6% as it announced another SpaceX order, its largest to date. It has won a USD68.1 million follow-on order from SpaceX, for the supply of its Cerus E-band gallium nitride solid state power amplifier, the manufacturer of radio frequency solutions said.

"The new order is expected to be materially fulfilled during FY2028, underpinning the board's expectations for FY2028, providing stronger visibility over future revenues," Filtronic added.

By Eric Cunha, Alliance News news editor

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