FTSE 100 falls as bond sell-off knocks equities
The FTSE 100 fell this morning as equities were hit by a global sell-off in bonds due to growing concerns about rising inflation.
London’s blue chip index was down 0.5 per cent at 6,618 points, along with the FTSE 250, which also fell 0.5 per cent.
Despite the fall, the FTSE 100 is still set to report a 2.0 per cent increase for the month, driven higher by surging commodities prices.
London’s main market continued to tumble as the day wore on, down 1.72 per cent in early afternoon trading.
Across the pond, Wall Street opened higher today, after a grim session yesterday as traders embarked on a selling spree after US Treasury 10-year bond yields hit the 1.6 per cent mark for the first time in a year.
That sent the tech-heavy Nasdaq down 3.5 per cent, while the S&P 500 fell 2.5 per cent and the Dow Jones 1.8 per cent.
But today the S&P 500 and the Nasdaq index opened higher, following a sharp pullback on Wall Street as tech-related stocks rebounded but sentiment remained fragile, with U.S. bond yields at one-year high.
The Dow Jones Industrial Average fell 0.7 points, or flat at the open to 31401.29. The S&P 500 rose 10.3 points, or 0.27 per cent, at the open to 3839.66, while the Nasdaq Composite rose 113.5 points, or 0.86 per cent, to 13232.901.
FTSE morning movers
On the FTSE 100, BA owner IAG was the biggest gainer, picking up 5.4 per cent in early trading despite falling to a loss of over €7bn.
Rightmove, which runs Britain’s largest online real estate portal, shed 1.5 per cent even as it expected robust market activity this year ahead of a potential extension of a tax break.
Airline shares have been marching higher all week on the news that international travel could return from May 17, offsetting the continued pain of current restrictions.
Pharma firms Hikma and Astrazeneca were also among the biggest climbers, up 3.1 and 1.1 per cent respectively, as was Dettol-owner Beckett Renckiser, a pandemic favourite.
Despite the fall, the FTSE 100 is currently trading ahead of its European rivals, with the DAX down 0.1 per cent and the CAC down 0.6 per cent.
Richard Hunter, head of markets at Interactive Investor, commented “The tantrum in the bond market has inevitably spilled over into equities as the spectre of inflation increases.
“Despite the soothing noises of the Federal Reserve, the repricing of inflation expectations is of concern. With excessive liquidity in the system and with the likelihood of a major release of pent-up demand as pandemic restrictions ease, inflation could soon spiral.
“In turn, this would put pressure on central banks to raise interest rates to quell the rise, affecting corporate lending and, importantly, the US mortgage market.
“At the same time, a higher interest rate environment is usually negative for stocks given the slowing of growth and it is therefore of little surprise that the likes of big tech have been in the firing line if future growth is to be compromised.”