The FTSE 100 fell sharply on Tuesday as US bond yields hit a 24-year high over fears that rising inflation will spark further interest rate hikes.
In London, the FTSE 100 index ended down 48.17 points, 0.5%, at 10,636.71. The FTSE 250 rose 39.49 points, 0.2%, to 24,374.81, and the AIM all-share firmed 2.80 points, 0.4%, at 786.16.
In European equities on Tuesday, the CAC 40 in Paris ended down 0.5%, while the DAX 40 in Frankfurt closed up 0.1%.
In New York, the Dow Jones Industrial Average was down 0.7% at the time of the closing bell in London. The S&P 500 was 0.4% lower, and the Nasdaq Composite declined 0.2%.
Oil prices eased after US president Donald Trump said on Monday he expects talks with Iran to continue.
Trade Nation analyst David Morrison said: “Traders are keeping their ears open to any indication that the US and Iran are making progress as they separately talk to mediators in an effort to bring about an end to hostilities.”
But Bloomberg News reported that sources in Iran have privately expressed pessimism about making a deal to reopen the key shipping route, the Strait of Hormuz, before US mid-term elections in just five weeks.
Brent oil was quoted at 104.44 dollars a barrel in London on Tuesday at the time of the equity market close, down from 107.60 dollars late on Monday.
Back in the UK, Prime Minister Andy Burnham told the Labour party conference that his social care overhaul will be paid for by changes to the pensions triple lock.
The triple lock – which currently guarantees that pensions will rise in line with inflation, 2.5% or average earnings, whichever is the largest increase – will be adjusted from 2030, removing the link to average earnings.
In addition, Mr Burnham vowed to strengthen public control of water and give local leaders new powers to hold water companies to account.
The pound was quoted at 1.3210 dollars on Tuesday, down from 1.3256 dollars at the same time on Monday. Against the euro, sterling eased to 1.1656 euro from euro 1.1658.
The euro fell to 1.1335 dollars from 1.1370 dollars. Against the yen, the dollar was trading at 157.59 yen, up from 157.44 yen.
Bond yields climbed once more with attention now on US inflation and jobs data later this week. Fears are rife that strengthening inflation will keep interest rates higher, for longer.
The yield on the US 10-year Treasury was quoted at 5.29%, stretched from 5.26%. The yield on the US 30-year Treasury was quoted at 5.60%, widened from 5.57%, hitting its highest level since 2002.
On the FTSE 100, the weak oil price weighed on Ithaca Energy, BP and Shell, down 3.7%, 2.3% and 1.7% respectively.
British American Tobacco fell 1.9% as it flagged foreign exchange headwinds in 2026, ahead of a capital markets day in the US.
The London-based cigarette and vaping products maker said that in 2026, based on current spot rates, it sees foreign exchange effects undercutting full-year adjusted diluted earnings per share growth by 2% to 2.5%.
On the FTSE 250, Vesuvius surged 25% as it confirmed it is “carefully” evaluating a takeover offer from RHI Magnesita, which ended down 0.2%.
The cash-and-shares offer values the London-based engineering company at 551 pence per share, or around £1.37 billion.
RHI said Vesuvius’s largest shareholder, Cevian Capital, which holds around 23% of Vesuvius, is supportive of the proposal if recommended by the Vesuvius board and has given an irrevocable undertaking to support it.
RHI has until October 27 to announce a firm intention to make an offer or walk away.
RBC Capital Markets explained that RHI Magnesita and Vesuvius are the global number one and two in flow control and refractory products for steel production, and thus felt the deal made strategic sense.
“We see the combination logic as strategically sound though some asset sales are likely to be needed for competition approvals,” the broker added.
But RBC felt the offer still has a “somewhat opportunistic feel given Vesuvius’s depressed multiples”.
Close Brothers leapt 15% as it reported better-than-expected progress on cutting costs and said loan book growth provided confidence in future targets.
The London-based merchant bank said its transformation programme has delivered £36 million of annualised cost savings in the 2026 financial year, ahead of schedule and substantially higher than the around £25 million latest target.
The FTSE 250-listed company now expects to exceed GBP60 million of annualised cost savings by the end of the 2027 financial year.
Trustpilot was also in the green, up 4.3%, as Citigroup started coverage at “buy” with a 375p price target.
But housebuilder Vistry, down 7.8%, gave back some of Monday’s strong gains, which were spurred by a Government initiative to boost the housing market.
Meanwhile, results failed to ignite Irn-Bru owner AG Barr, which fell 3.5%.
AJ Bell investment director Russ Mould said AG Barr still has some “making up to do” with the market after August’s revelation that it would take a £10 million hit from issues in its supply chain.
Elsewhere, Smiths News jumped 4.4% as it said it expects full-year results to be ahead of market expectations.
In a trading update, the news wholesaler said the football World Cup boosted demand for collectables, bolstering the overall performance of the news and magazines business.
“FY27 is shaping up to be a transformational year for Smiths News, with it expanding its current distribution footprint to deliver on a fully nationwide basis,” said analysts at Berenberg, who called the trading update positive.
Gold was quoted at 4,157.46 dollars an ounce, up from 4,123.33 dollars.
The biggest risers on the FTSE 100 were Weir, up 78.00p at 2,712.00p, Convatec Group, up 5.00p at 217.00p, Metlen Energy & Metals, up 1.02p at 49.14p, InterContinental Hotels Group, up 3.00p at 161.50p and Halma, up 62.00p at 3,528.00p.
The biggest fallers on the FTSE 100 were Ithaca Energy, down 10.60p at 275.00p, BP, down 12.80p at 550.70p, J Sainsbury, down 7.00p at 329.60p, British American Tobacco, down 79.00p at 4,144.00p and Rentokil Initial, down 5.50p at 298.50p.
Wednesday’s local corporate calendar features a trading update from bakery chain Greggs and half-year results from retirement products seller, Saga.
Wednesday’s global economic calendar has Australian inflation figures overnight, retail sales figures in Japan and Germany, UK and US GDP figures and the ADP private payrolls report.
Contributed by Alliance News.
