LONDON MARKET MIDDAY: FTSE 100 slips as Starmer turmoil lifts yields

Tue, 12th May 2026 12:18

(Alliance News) - Stock prices in London were lower by midday Tuesday, as political turmoil in Westminster and renewed tensions in the Middle East weighed on sentiment and pushed bond yields sharply higher.

The FTSE 100 index was down 42.88 points, 0.4%, at 10,226.55. The FTSE 250 was down 266.82 points, 1.2%, at 22,541.04, and the AIM all-share was down 6.35 points, 0.8%, at 816.06.

The Cboe UK 100 was down 0.5% at 1,016.91, the Cboe UK 250 was down 1.5% at 19,498.59, and the Cboe small companies was marginally higher at 18,343.86.

In European equities on Tuesday, the CAC 40 in Paris was down 0.6%, while the DAX 40 in Frankfurt was down 1.0%.

In the UK, political uncertainty rattled bond markets. Yields on 30-year UK government bonds climbed to their highest level since 1998, as pressure intensified on Prime Minister Keir Starmer to step down.

British government bonds are underperforming their European counterparts across the curve, reflecting concerns about the UK's vulnerability to an energy shock as oil prices remain elevated, alongside mounting political risk.

The yield on the UK 10-year gilt was quoted at 5.093%, the highest level since 2008, up 0.092 percentage points from 5.002% at the previous close.

The day's high stood at 5.130%, before easing slightly after ministers loyal to Starmer insisted that "no one challenged" the prime minister at a crucial cabinet meeting.

Starmer held the high-stakes meeting on Tuesday morning as he fights to stay in office. Allies publicly backed him as they left Downing Street, saying he had vowed to "get on with governing" and had told his top team that a leadership contest had not been triggered.

In chaotic scenes afterwards, several cabinet ministers spoke to reporters, though Health Secretary Wes Streeting, seen as a potential leadership rival, ignored questions shouted by journalists.

An influential group of Labour MPs has called for a renewal of the party's economic strategy to create a "more active state" and prioritise "long-term investment" over "short-term crisis management".

In a joint introduction to a collection of essays published on Monday, former Cabinet minister Louise Haigh and Yuan Yang, who is among at least 79 Labour MPs who have called on the prime minister to step down, said politics must offer "more than better management of decline".

They said the collection would explore questions such as "how to build a tax system that is fairer, simpler, and better aligned with modern sources of wealth and economic activity" and how "social investment and market reforms can reduce the cost of living".

Meanwhile, 30-year yields, where fiscal and political concerns are most clearly expressed, have reached levels not seen in nearly three decades.

The pound was also hit by Westminster's political instability. Sterling was quoted at USD1.3540 midday Tuesday, compared to USD1.3651 on Monday.

Against the euro, sterling fell to EUR1.1528 from EUR1.1584 a day earlier. The euro stood at USD1.1745, against USD1.1782, while the dollar traded at JPY157.55, up from JPY157.01.

Across the Atlantic, US President Donald Trump said the Iran ceasefire was on "life support" and that he was considering restarting US naval escorts through the Strait of Hormuz as he pushes for what he described as "complete victory" in the conflict.

Amid mounting pressure over the economic impact of the war, Trump said Iran's rejection of Washington's latest demands had left the already fragile ceasefire "unbelievably weak".

He told Fox News he was weighing a revival of Operation Freedom, a previous US effort to escort commercial shipping through Hormuz, though no final decision has been taken.

Iranian parliamentary speaker Mohammad Bagher Ghalibaf responded that Iran was prepared "for any eventuality".

Brent oil was trading at USD107.84 a barrel early Tuesday, up from USD103.70 late Monday.

Stocks in New York were called lower. The Dow Jones Industrial Average was called down 0.1%, the S&P 500 down 0.3% and the Nasdaq Composite down 0.7%.

Investors were awaiting key US data, with the ADP employment change four-week average due at 1315 BST, most recently up 39,250, and US consumer price inflation for April due at 1330 BST. The consensus expects CPI to rise 3.7% year-on-year, up from 3.3% in March.

The yield on the US 10-year Treasury was quoted at 4.43%, widening from 4.39%. The yield on the US 30-year Treasury rose to 5.00% from 4.97%.

Political risk spilled over into equity markets, with UK banks among the biggest fallers in the FTSE 100. Barclays dropped 3.4%, NatWest fell 3.0%, and Lloyds Banking Group was down 3.3%.

However, Vodafone Group was at the bottom of the index, despite hailing a strong growth outlook as sales and earnings increased. The Berkshire-based telecommunications provider swung to a pretax profit of EUR1.86 billion in the financial year to March from a EUR1.48 billion loss the year prior.

Revenue grew 8.0% to EUR40.46 billion from EUR37.45 billion, driven by strong service revenue growth and the consolidation of Three UK, partially offset by foreign exchange movements.

Intertek topped the blue-chip index after suitor EQT Fund Management Sarl made what it described as its "final possible offer" for the assurance, inspection, product testing and certification firm.

EQT's final proposal values Intertek at GBP60 per share in cash, or GBP61.077 including a final dividend, implying a total valuation of GBP9.40 billion. The proposal follows a GBP58.00 per share bid made on Friday, which valued the company at around GBP8.93 billion.

Intertek said it is reviewing the final proposal with its advisers and will make a further announcement in due course.

On the FTSE 250, Greggs rose 4.3% after reporting higher sales in the opening weeks of 2026 and maintaining full-year expectations.

The Newcastle upon Tyne-based bakery chain said total sales in the first 19 weeks of the year rose 7.5% to GBP800 million from GBP744 million, while like-for-like sales increased 2.5%, improving to 3.3% growth in the most recent 10 weeks. It added that profit performance has been supported by operational cost control and said its outlook for cost inflation and full-year expectations remains unchanged.

At the other end of the index, Wickes Group shares plunged 10% after reporting mixed trading as wet weather weighed on retail demand at the start of 2026.

The home improvement retailer said revenue in the 17 weeks to April 25 rose 1.3% to GBP537 million, though like-for-like sales fell 0.1%, with weaker outdoor project demand offsetting growth in Design & Installation. It added that it remains comfortable with full-year market expectations for adjusted pretax profit despite continued uncertainty in the trading environment.

In the eurozone, investor sentiment improved more than expected in May, according to ZEW survey data.

The ZEW indicator of economic sentiment for the eurozone rose by 11.3 points to minus 9.1 in May from minus 20.4 in April, beating the FXStreet-cited consensus for a smaller improvement to minus 20. The current economic situation index climbed to minus 41.4 from minus 43.0.

In Germany, the ZEW economic sentiment indicator improved to minus 10.2 in May from minus 17.2 in April, beating expectations of a deterioration to minus 19.8. However, the current situation index worsened to minus 77.8 from minus 73.7, slightly worse than consensus forecasts.

ZEW President Achim Wambach said: "Weak industrial production, rising energy prices and an inflation rate that exceeds the two-percent mark continue to burden the German economy. There is cautious hope for a potential recovery in the second half of 2026, provided that the Middle East conflict eases and the government's economic stimulus measures are having an effect."

Gold was quoted at USD4,692.63 an ounce, down from USD4,733.27 on Monday.

Still to come on Tuesday's economic calendar are US consumer price index inflation, the Redbook index, the monthly budget statement and ADP employment change figures.

By Eva Castanedo, Alliance News reporter

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