European equity markets fell sharply on Wednesday as a renewed bond sell-off rattled investor confidence across the continent and beyond.
London’s FTSE 100 (^FTSE) closed down 83.19 points, or 0.8%, finishing the session at 10,458.50, reflecting broad-based weakness across major sectors.
The FTSE 250 fell 178.58 points, or 0.7%, to 24,036.75, while the Aim all-share shed 7.64 points, ending the day at 775.98.
European markets fared even worse, with both the Cac 40 (^FCHI) in Paris and the Dax 40 (^GDAXI) in Frankfurt each closing down 1.4%.
Bond yields soared as investor concern deepened, with the UK 10-year yield rising 10 basis points and the 30-year gilt yield climbing back above 6%.
Bank of France head Emmanuel Moulin acknowledged that France’s economic situation is serious given the rise in its borrowing costs, but said the country does not at this point need help from the European Central Bank.
Kathleen Brooks, research director at XTB, said “risk sentiment is deteriorating further,” adding that Moulin’s comments are “spooking investors and triggered this sell off.”
Brooks also noted that “although French and Italian bonds are at the epicentre of today’s sell-off, UK yields are playing catch-up.”
The US 10-year Treasury yield hit a 24-year high, quoted at 5.32% on Wednesday, stretching from 5.27% at the same time on Tuesday, while the 30-year Treasury yield widened to 5.69%.
David Morrison, analyst at Trade Nation, said investors continue to favour the dollar, though “much of this love comes from it being the cleanest shirt in the laundry,” citing dismal economic outlooks for France, Germany, the UK, and Japan.
The pound slipped to 1.3210 dollars from 1.3280 dollars, while the euro fell to 1.1187 dollars from 1.1264 dollars as currency markets reflected the risk-off mood.
Oil prices added to investor anxiety, with Brent crude quoted at 101.77 dollars a barrel in London, up sharply from 98.37 dollars late on Tuesday, amid fresh concerns about Middle East supply disruptions.
Chris Weston, head of research at Pepperstone, told AFP that “for now, the market remains highly sensitive to headlines and geopolitical risk” surrounding attacks on vessels in the Strait of Hormuz.
On the FTSE 100, financials bore the brunt of the losses, with Standard Chartered (^FTSE) down 4.5%, HSBC (^FTSE) off 4.4%, Barclays (^FTSE) falling 3.4%, NatWest (^FTSE) dropping 2.8%, and insurer Prudential (^FTSE) sliding 4.7%.
HSBC said consultations were under way after the Financial Times reported the bank “is planning sweeping job cuts in its UK wealth management business as part of a push to use AI to help serve wealthy clients.”
Against the weaker trend, JD Sports (^FTSE) rose 3.9% after Frasers Group took an 8.8% stake in sportswear brand Under Armour, with Frasers itself closing up 2.8%.
Goldman Sachs upgraded Reckitt Benckiser (^FTSE) to “buy” and called Haleon’s (^FTSE) valuation “compelling,” sending both consumer goods stocks up 2.6% and 2.5% respectively.
Goldman analyst Olivier Nicolai said consumer health is an “attractive category with scope for consolidation,” helping lift sentiment in the sector amid otherwise gloomy market conditions.
On the FTSE 250, Avon Technologies soared 15% after the military equipment manufacturer said it expects annual results to be ahead of market expectations, with adjusted operating profit margin set to finish “comfortably above” its guided range.
Water company Pennon plunged 20% after announcing a heavily discounted rights issue and a dividend cut, prompting Dan Coatsworth, head of markets at AJ Bell, to say “investors are not going to like this news one bit.”
Chief executive Keith Haslett acknowledged Pennon has “real strengths, but there are areas where we need to improve and deliver better outcomes,” as analysts at Citigroup and JPMorgan offered cautiously optimistic longer-term views.