The FTSE 100 was sharply lower on Friday as rising bond yields in the US and UK sent stocks into a tailspin.
Rising UK bond yields make it clear what the market thinks of Labour’s ‘King of the North’ Andy Burnham as he moves to take a seat in parliament through a by-election.
The 30-year yield rose above 5.8% as investors dumped UK debt for fear of Burnham taking power and tearing up Labour’s current fiscally responsible policies.
If that wasn’t enough for UK traders, rising inflation risks in the US sent US treasury yields higher, which in turn dragged metals prices lower.
The weight of concerning developments was too much for traders to bear on Friday, and the FTSE 100 was down over 1.4% at the time of writing.
“The FTSE 100 fell as emerging evidence of inflationary pressures and domestic political uncertainty combined to put investors on edge,” said AJ Bell investment director Russ Mould.
“The decision of a Labour MP to stand down and pave the way for Andy Burnham to return to parliament – likely as a precursor to a leadership challenge – has seen gilt yields move yet higher.
“While there’s no guarantee Burnham would win a by-election or contest to be prime minister, the fact he is on record as saying Britain must stop being ‘in hock to bond markets’ has helped push UK borrowing costs higher and seen the pound slump.”
The FTSE 100 leaderboard didn’t make for good viewing on Friday, with most stocks trading negatively, some deep in the red.
Miners were the hardest hit as metal prices tumbled amid inflation concerns. Precious metals miner Fresnillo is no stranger to volatility, and a near-3% decline in gold prices sent the stock down 8% to the bottom of the leaderboard.
Anglo American and Antofagasta were down 6% and 7.5%, respectively.
Airtel Africa shed 7% and reversed all gains after a shareholder signalled it was reorganising its holdings in the firm earlier this week.
The fear of rising UK bond yields was felt in utilities companies, with the usually stable United Utilities, Centrica and SSE all falling more than 4%.
UK banks and housebuilders were all lower.
3i Group was the FTSE 100’s top riser as it rebounded from yesterday’s sell-off. Shares were 4% to the good.