FTSE 100 hits three-month low as surging bond yields hit risk appetite

FTSE 100 Reaches Three-Month Low as Surging Bond Yields Weigh on Sentiment

Market Overview and Key Drivers

By Anand Gopal R

Oct 1 (Reuters) - UK's FTSE 100 fell to a three-month low on Thursday in broad-based declines as a sharp rise in global bond yields to multi-decade highs fanned inflation concerns and dampened investor sentiment.

The blue-chip FTSE 100 index fell 1.48% to 10,448.78 points by 1008 GMT, headed for its fourth straight session of losses, while the midcap FTSE 250 slipped 1.23%.

Bond Yields and Inflation Concerns

• Yield on the British 30-year gilt surged to its highest since early 1998 at 5.9773%. The benchmark 10-year gilt climbed to 5.449%, its highest since 2007 [GB/]

• Cyclical stocks came under stress as the surging yields reinforced worries that persistent inflation could keep interest rates higher and weigh on economic growth

Fiscal Outlook and Market Sentiment

• "(The selloff) is much more to do as well with concerns over the fiscal outlook of the UK as we head towards the budget later this month," said Fiona Cincotta, senior market analyst, StoneX

Sector Performance

Financials and Banking Stocks

• Financials were the biggest drag on the FTSE 100. Banks fell 2.9% to their lowest in more than three months

• Banking major HSBC declined 3.2%, while Standard Chartered fell 2.5%

Other Sectors Under Pressure

• Energy sector, consumer-focused personal care stocks and beverages sector were among the laggards

Interest Rate Expectations

• Traders are currently pricing in a 95% chance that the Bank of England increases borrowing costs at its November meeting, according to data compiled by LSEG, mirroring rate hikes from central banks globally

Commodities and Economic Data

Oil Prices and Global Supply

• Oil prices rose around 2% after China suspended oil product exports, potentially tightening fuel markets already coping with supply shortages globally

Housing Market and Homebuilders

• On the data front, British house prices posted their weakest annual growth since December 2025, underscoring the impact of higher borrowing costs

• Homebuilder stocks declined 2.9%

Notable Movers

Corporate Announcements

Breedon Group Leadership Change

• Among other movers, construction materials company Breedon Group slid 4.1% after naming James Brotherton to succeed Rob Wood as group CEO

(Reporting by Anand Gopal and Avinash P in Bengaluru; Editing by Sahal Muhammed)