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FTSE 100 falls as bonds selloff, geopolitical tensions weigh

Mon, 10th Oct 2022 17:17

Power stocks hit by report of price cap

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Mid-cap stocks at one-week lows

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DS Smith jumps on upbeat forecast

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FTSE 100 down 0.5%, FTSE 250 off 1.3%

Oct 10 (Reuters) - UK's blue-chip stock index fell for a fourth straight session on Monday, tracking a slide in global markets, while yields shot up across the range of British debt maturities despite a raft of announcements by the finance minister and the Bank of England.

The FTSE 100 index slipped 0.5% and the mid-cap FTSE 250 index dropped 1.3% to touch one-week lows, extending Friday's losses, also coming under pressure as strong U.S. jobs data doused hopes the Federal Reserve would temper rate hikes.

Energy stocks slid 1%, tracking crude prices as investors weighed potentially tight supply against economic storm clouds that could foreshadow a global recession and erosion of fuel demand.

British government bond prices tumbled in a sign that investors are yet to be convinced by finance minister Kwasi Kwarteng's drive to shore up fiscal credibility, which included bringing forward his new fiscal plan to Oct. 31.

"We've seen sell off in UK gilts once again," Daniela Hathorn, market analyst at Capital.com, said.

"The likelihood of the Bank of England to deliver an emergency rate hike before November 3 is picking up."

The Bank of England also moved to ease concerns about the expiry of its emergency programme at the end of this week to calm turmoil in the government bond market, including a doubling of the maximum size of its planned debt buy-back on Monday.

Weighing on global markets, massive explosions shook the Ukrainian capital and other cities in apparent revenge strikes by Russia after President Vladimir Putin declared an explosion on the bridge to Crimea to be a terrorist attack.

British power companies Centrica and Drax fell 2.7% and 4.9% respectively after the Financial Times reported the UK government was pressing ahead with plans to cap revenues of renewable electricity generators.

"Our view is that such a cap would be punitive for the sector and may distort investment incentives," Jefferies analysts said.

DS Smith jumped 12.1% after the cardboard maker forecast overall annual performance ahead of its expectations, helped by strong revenue growth and cost cuts. (Reporting by Sruthi Shankar and Bansari Mayur Kamdar in Bengaluru; Editing by Subhranshu Sahu, Savio D'Souza and Andrew Heavens)

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