MARKET REPORT: Blue chips turn red amid bond market turmoil
The bond market turmoil led to heavy selling in British shares yesterday as investors, worried about the health of the economy under Labor, ran for the hills.
As British government bond yields soared and the pound fell, the FTSE 100 rose 0.1 percent, or 5.75 points, to 8,251.03, while the more domestically focused FTSE 250 rose 2 percent, or 398, 1 point, plummeted to 19,952.24.
Post-election hopes that a period of political stability would help revive London’s languishing stock market have long since faded.
Instead, investors see stagflation as higher taxes, spending, loans and debt – part of a decisive shift from the private sector to the public sector – cripple the economy.
Donald Trump did little to help. Following his suggestion that he could use military force to seize the Panama Canal and Greenland, the president-elect is said to be willing to declare an economic emergency in the US to justify new tariffs.
“When you’re talking about an economy like the US, the use of such language is disturbing,” said Danni Hewson, head of financial analysis at AJ Bell.
‘Tariffs will hurt both Europe and the global economy. It will cause trade friction and be inflationary, but also potentially inflationary across Europe.”
Sell-off: With UK government bond yields rising sharply and the pound falling, the FTSE 100 rose 0.1%, while the more domestically focused FTSE 250 tumbled 1.9%
It wasn’t all doom and gloom in the London market, however, as gains in heavyweight defense and banking stocks were more than offset by selling elsewhere.
BAE Systems rose 3.1 percent, or 36 cents, to 1,190 cents, after Trump called for higher defense spending by NATO allies, while Rolls-Royce rose 0.2 percent, or 1.4 cents, to 578 cents.
Among banking shares, HSBC rose 2 percent, or 15.2p, to 791.2p, its highest level since 2008, after Bank of America gave it a buy rating.
And the London Stock Exchange Group hit a new record high – up 1.7 per cent, or 190p, to 11,615p – after Bank of America named it as one of its ’25 stocks for 2025′.
But the mood was somber: Calastone figures show a further £9.6 billion was withdrawn from UK equity funds last year, taking outflows since 2015 to £45 billion.
“UK share valuations are clearly cheap, but investors are capitulating and appear to be giving up hope that a long-awaited revaluation will take place,” said Edward Glyn, head of global markets at Calastone.
Fund manager Ashmore fell 7.6 per cent, or 11.9p, to 143.9p after analysts at Jefferies downgraded the shares.
Flooring specialist Topps Tiles rose 1.6 per cent, or 0.6 cents, to 37.8 cents after CEO Rob Parker stepped down after 18 years, reporting a 4.6 per cent rise in first-quarter sales.
Investor MS Galleon, which has a 29.9 percent stake, welcomed the change and had called for a leadership review. MS Galleon boss Piotr Lipko said it was “a positive first step”.
Pots, pans, kettles and knife maker ProCook reported an 11.2 per cent rise in the third quarter to £25.6 million, boosted by Black Friday and Christmas, and rose 10.4 per cent, or 4p, to 42.5p.
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