LONDON MARKET MIDDAY: Shares slide as gilt surge rattles investors

Fri, 15th May 2026 12:18

(Alliance News) - Stock prices in London were sharply lower by midday Friday, as political upheaval in Westminster and rising borrowing costs unsettled investors, while weakness across European markets added to the cautious tone.

The FTSE 100 index was down 128.20 points, 1.3%, at 10,242.84. The FTSE 250 was down 278.39 points, 1.2%, at 22,549.68, and the AIM all-share was down 7.40 points, 0.9%, at 809.72.

The Cboe UK 100 was down 1.2% at 1,018.07, the Cboe UK 250 was down 1.4% at 19,470.66, and the Cboe small companies was marginally higher at 18,293.11.

In European equities on Friday, the CAC 40 in Paris was down 1.5%, while the DAX 40 in Frankfurt was down 1.7%.

UK assets were under notable pressure as investors reacted to escalating political uncertainty following last week's local elections, in which Labour suffered significant losses.

Starmer is bracing for what could become a protracted leadership contest after Greater Manchester Mayor Andy Burnham signalled his intention to contest an upcoming by-election in order to return to Westminster. Burnham can only stand for the Labour leadership if he is an MP, and Makerfield MP Josh Simons has said he would resign to clear the way for him.

On Thursday, Health Secretary Wes Streeting resigned, saying he had "lost confidence" in Starmer's leadership. Streeting has since backed Burnham for the Makerfield by-election, saying he has the "best chance of winning". Burnham has also secured the support of Deputy Labour Leader Lucy Powell.

Gilt markets reacted sharply to the political developments. UK government bonds sold off as investors weighed renewed inflation concerns alongside the prospect of Burnham gaining a viable route to challenge Starmer.

The British 10-year gilt was quoted at 5.146% on Friday morning, jumping from 4.992% at the close on Thursday. It reached a day high of 5.150%.

Although borrowing costs have risen elsewhere in Europe, the moves in UK markets have been more pronounced. The divergence reflected concerns that a Burnham-led government could pursue higher public spending, increasing borrowing requirements.

Barclays analysts said that periods of political uncertainty have increasingly become a "default setting" for gilt markets, with the latest bout triggered by the fallout from the local elections.

Investors remain wary that a successor to Starmer could tilt policy further to the left, potentially driving higher public spending and pushing borrowing costs up further.

Streeting is viewed by gilt investors as the least disruptive option, seen as a continuity candidate most likely to adhere to Labour's current fiscal framework. Burnham, by contrast, is regarded by some as posing greater fiscal risk, particularly after remarks last year that the country should not be "in hock" to the bond market.

Sterling has also come under sustained pressure.

The pound was quoted at USD1.3369 midday Friday, lower compared to USD1.3480 on Thursday. Against the euro, sterling fell to EUR1.1482 from EUR1.1549 a day earlier. The euro stood at USD1.1644, against USD1.1677 late Thursday. Against the yen, the dollar was trading at JPY158.48, compared to JPY158.14.

Across the Atlantic, stocks in New York were called lower. The Dow Jones Industrial Average was called down 0.6%, the S&P 500 index down 1.0%, and the Nasdaq Composite down 1.4%.

In Asia, attention remained on US-China relations after Donald Trump concluded what he described as "very successful" talks with Chinese President Xi Jinping in Beijing.

Trump wrapped up his state visit saying the meeting had been "very successful, world-renowned, and unforgettable", while Xi characterised it as a "historic and landmark" visit, according to Chinese state media.

Trade, oil, Iran and Taiwan were among the issues discussed during two days of meetings.

Earlier, Trump said in an interview with Fox News that Xi had committed to withholding military equipment from Iran. The US president also said China wants the Strait of Hormuz reopened and that Beijing has agreed to buy oil from the US.

Brent oil was quoted at USD107.45 a barrel early in London on Friday, up from USD104.92 late Thursday.

Separately, Iran's Foreign Minister Abbas Araghchi said on Friday that Tehran is open to support from China in efforts to resolve the Middle East conflict. "We appreciate any country who has the ability to help, particularly China," Araghchi told reporters in New Delhi, where he was attending a meeting of the BRICS bloc.

Further, Araghchi said his government had received messages from the US indicating that Trump's administration was open to continuing talks aimed at ending the Middle East war.

The yield on the US 10-year Treasury was quoted at 4.54%, widening from 4.46%. The yield on the US 30-year Treasury was quoted at 5.09%, widening from 5.01%.

US industrial production is due at 1415 BST, with consensus expecting a 0.3% month-on-month rise in April, following a 0.5% decline in March.

Back in London, miners were among the heaviest fallers as gold and other metal prices slipped. Fresnillo dropped 7.7%, Antofagasta fell 7.4% and Anglo American lost 5.8%.

Airtel Africa was the biggest loser on the FTSE 100, down 8.4%.

At the top of the blue-chip index, 3i Group rose 5.4% after it was disclosed that directors in the London-based private equity investor had purchased more than GBP700,000 worth of shares.

On the FTSE 250, Aberdeen Group climbed 2.5% to lead the index after receiving a broker upgrade from Citi to 'buy'.

Among smaller caps, Metals One jumped 45% after expanding its US uranium waste recovery plans.

From Germany, the Economy Ministry said it expects a clear slowdown in the second quarter after a stronger-than-anticipated start to the year. In its May report, the ministry said signs of a noticeable economic weakening were intensifying.

Just over three weeks ago, the government halved its full-year forecast and now expects only minor growth of 0.5% in 2026.

Economy Minister Katherina Reiche said the escalation in the Middle East had set Germany back economically, as it had other countries, noting that the war in Iran is pushing up energy and raw material prices.

Earlier data showed that Germany's economy grew by 0.3% quarter-on-quarter in the first quarter, stronger than expected.

Gold was quoted at USD4,567.93 an ounce, down from USD4,688.75 on Thursday.

Still to come on Friday's economic calendar are Canada's manufacturing sales, the New York Empire State manufacturing index and US industrial production data.

By Eva Castanedo, Alliance News reporter

Comments and questions to newsroom@alliancenews.com

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