London’s FTSE 100 pulled down by pension managers after more BoE bond support

London’s FTSE 100 today was pulled down by the UK’s largest money managers dropping after the Bank of England stepped up its support for the bond market again.

The capital’s premier index dropped 1.06 per cent to 6,885.23 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, fell 1.29 per cent 16,904.06 points.

The Bank today ramped up its emergency bond buying package for the second time in as many days to tackle what is described a “material risk to UK financial stability” arising from a sharp sell off in the gilt market.

The central bank will now include inflation linked bonds in its purchases. Earlier this week, it doubled the cap on its daily purchases to £10bn and expanded a loan scheme.

Today’s move put pension managers under intense pressure.

FTSE 100-listed Aviva and Legal and General dropped 4.17 per cent and 5.18 per cent a piece.

Online supermarket Ocaod was the biggest faller of the day.

Threadneedle Street’s intervention in the gilt market is “putting pressure on financial and insurance stocks,” Victoria Scholar, head of investment at interactive investor, said.

UK gilt yields dropped on the Bank’s intervention and the pound strengthened one per cent against the US dollar. Prices and yields move in opposite directions.

Figures released by the Office for National Statistics (ONS) yesterday revealed the UK jobs market is beginning to wilt under the pressure of a weakening economy.

The unemployment rate fell 3.5 per cent, its lowest since the mid 1970s, but it was artificially lowered by a big outflow of workers from the jobs market.

Vacancies growth cooled and the rate of increase in people employed slowed.

Strong wage growth increases the likelihood of the Bank hiking rates for the eighth time in a row on 3 November, analysts said.