The FTSE 100 dipped on Wednesday as bond yields rose globally amid concerns about interest rate hikes to combat inflation.
Rising bond yields weighed on equities again overnight as inflation risks rise and the prospect of US interest rate hikes becomes more likely. US 30-year debt was yielding 5.2% on Wednesday, near the level it was before authorities intervened in the bond market in August – a move traders will have an eye on.
The concerns about rising bond yields are not localised to the US, with German and UK long-dated debt hitting multi-year highs.
In the UK, rising yields are a particular problem for the new Prime Minister, who will have to contend with the government’s fiscal headroom rapidly diminishing as debt servicing costs rise.
However, after falling yesterday, the FTSE 100 was broadly steady on Wednesday, dipping just beneath 10,800 at the time of writing. Selling could pick up if US nerves continue into a second session. The S&P 500 closed down 0.7% yesterday.
Gold prices were lower again, hitting precious metals miners Fresnillo and Endeavour Mining, both of which had a torrid session yesterday. The losses, however, were not nearly as bad as those suffered in the prior session.
“Gold remained under pressure early on Wednesday, hitting its lowest level since early August as a firmer dollar and higher U.S. Treasury yields weighed on the non-yielding asset,” said Konstantinos Chrysikos of Kudo.com.
“Renewed U.S.-Iran tensions pushed oil prices higher and stoked inflation and rate-hike fears, keeping investors cautious as they focused on the upcoming U.S. jobs data for further clues.”
BP investors will hope that the announcement of Ian Tyler as the new chair on Wednesday will draw a line under a period of leadership volatility and allow the company to focus on shareholder returns.
“I will lead the board’s evolution, ensuring we have the depth, experience and capabilities needed to support the company’s strategic priorities and long-term value creation,” Ian Tyler said.
BP shares were 0.5% higher at the time of writing.
Bunzl was among the early fallers, giving back some of yesterday’s gains while IHG caught the attention of traders and was the top riser at the time of writing.