Britain’s long-term government borrowing costs today reached a 27-year high, ramping up pressure on Chancellor Rachel Reeves.
The fears over the UK’s public finances ahead of the autumn budget left sterling 1% weaker against the US dollar. UK stocks in the FTSE 100 also fell.
Meanwhile, the price of gold today set a new all-time high above $3500 an ounce.
FTSE 100 Live Tuesday
- Borrowing costs at 27-year high
- Gold price at record high
- Nuclear power sites to continue
Market update: UK stocks slump in weaker FTSE 100, M&S falls 3%
09:44 , Graeme EvansA flight from UK assets today weakened the shares of Marks & Spencer and Taylor Wimpey by 3% as the FTSE 100 index reversed 0.4% to a two-week low.
Fears over the UK’s fiscal position meant the pound dropped 1% against the US dollar, while the yield on 30-year gilts climbed to its highest level since May 1998 and the domestic-focused FTSE 250 index shed 1%.
The support of commodity-focused stocks, including 1% gains for BP and Shell, meant the decline of the FTSE 100 index was limited to 33.81 points at 9162.53.
Fresnillo added another 16p to 1841p after silver broke above $40 an ounce for the first time since 2011 and gold set an intraday high above $3500 an ounce.
The fallers board was dominated by stocks with UK exposure, including rate-sensitive investments such as United Utilities, SSE and Land Securities after they retreated 2.5%.
Marks & Spencer led the fallers board with a decline of 13p to 331.3p, while B&Q owner Kingfisher dipped 6.5p to 250.3p and Sainsbury’s dropped 7.6p to 293.6p.
Housebuilders felt the impact of the UK economic uncertainty as Barratt Redrow fell 9.6p to 350p and Persimmon eased 26.5p to 1047p.
A broker downgrade added to the pressure on Taylor Wimpey, which fell another 3.3p to trade at a fresh post-pandemic low of 92.7p.
The FTSE 250 index fell 226.13 points to 21,407.56, with B&M European Value Retail, ASOS and Bellway among the stocks down by 4%.
North Sea explorer Ithaca Energy dropped 24.5p to 213p after two shareholders sold a 3% stake worth £106 million.
Borrowing costs at 27-year high, pound weakens
09:38 , Graeme EvansBritain’s long-term government borrowing costs today reached a 27-year high, ramping up pressure on Chancellor Rachel Reeves to calm fears over the UK’s public finances ahead of the autumn budget.
The 30-year gilt yield climbed to near 5.7%, meaning it costs more for the Government to borrow from financial markets.
The pound also weakened as the bond sell-off intensified, with sterling down 1% to 1.34 US dollars and 0.6% lower at 1.15 euros.
Neil Wilson, investor strategist at Saxo UK, said: “Gilt yields in the UK rose after the prime minister reshuffled the deck, seemingly sidelining his iron chancellor Reeves by poaching her deputy. If the Treasury won’t break the rules, then perhaps Number 10 can?
“The market move was a sign that investors do not have confidence the Treasury will stick to its strict borrowing rules.”
Gold sets record as 2025's best major asset
08:58 , Graeme EvansGold hit a new all-time intra-day high of $3508 an ounce today, extending its year-to-date gains to more than 30% as the best performing major asset class.
UBS Global Wealth Management’s base case is $3700 by next June, with the potential to rise to $4000 in a risk scenario where geopolitical or economic conditions deteriorate.
It said: “Gold's status as a durable long- term portfolio diversifier is strengthening amid higher government debts, persistent inflation, geopolitical risks, and the desire of ex-G10 central banks to raise their longer-term holdings as a percentage of total reserves.”
The bank said that central banks look set to remain enthusiastic buyers. Falling bond yields also reduce the opportunity cost of holding the zero-yielding asset.
Ryanair and Wizz Air passenger numbers rise
08:30 , Graeme EvansRyanair today said it carried 21 million passengers in August, a rise of 2% on a year earlier.
The Dublin-based airline’s load factor, which is the proportion of seats filled on flights, was unchanged at 96%.
The airline’s passenger figure for the 12 months to the end of August grew by 6% to 203.6 million.
Meanwhile, Wizz Air said it carried 6.9 million passengers last month, up 11% from 6.2 million in August 2024. It recorded a load factor of 95% last month.
FTSE 100 struggles, British American Tobacco down 2%
08:24 , Graeme EvansEuropean stock markets have opened on the back foot, with the FTSE 100 index down 0.4% or 40.22 points to 9156.12.
British American Tobacco fell 2% or 85p to 4071p after RBC analysts gave the stock an Underperform rating and 3400p price target.
Imperial Brands also fell 20p to 3077p, while Unilever dropped 29p to 4635p and catering giant Compass eased 15p to 2502p.
On the risers board, Barclays improved 2.3p to 369.6p and GKN Aerospace owner Melrose Industries added 2.8p to 593.6p.
Thames Water creditors offer additional £1.25bn - report
07:39 , Graeme EvansAttempts to secure a Thames Water rescue deal are reportedly set to see the utility’s largest group of creditors offer an additional £1.25 billion of new equity and debt write-offs.
Last night’s report by Sky News also said that the senior creditors will today set out further details of their operational plans for running the UK's biggest water company.
The reported additional £1.25 billion package comes as the creditors bid to persuade Ofwat and the government to pursue a rescue deal with them that would head off nationalisation.
On Monday, the Times reported that Chancellor Rachel Reeves had reaffirmed the government's desire to see a "market-based solution" to the crisis.
Nuclear power sites to continue until 2028
07:25 , Graeme EvansBritish Gas owner Centrica today announced further life extensions for the Heysham 1 and Hartlepool nuclear power stations.
They are now expected to generate electricity until March 2028, one year later than previously expected.
There is no change to the expected March 2030 closure date of Heysham 2 and Torness, announced in December.
These stations provide low-carbon electricity to power more than four million homes a year, reducing the need for fossil fuels and supporting the UK's ambitions to have a clean, secure energy supply. Centrica holds a 20% stake.
Chief executive Chris O’Shea said: “Our recent investments in Sizewell C and the Isle of Grain LNG terminal further underscores our commitment to securing the UK's energy future through a range of low-carbon technologies."
Gold price sets new record, FTSE 100 seen flat
07:01 , Graeme EvansGold today traded at a record high price, boosted by safe haven demand and US interest rate cut expectations.
The commodity rose 0.6% to $3501 an ounce, which compares with $2500 a year ago.
As well as the record gold price, silver yesterday broke above $40 an ounce for the first time since 2011.
Deutsche Bank said: “This surge is largely driven by anticipation of rate cuts and persistent inflation fears, reinforcing their role as classic inflation hedges and safe havens during turbulent times.”
The London stock market is set for a subdued start to trading as Wall Street markets were closed yesterday for the Labor Day holiday.
The FTSE 100 index closed up nine points at 9196.34, ending a four-day losing streak. The Hang Seng index has unwound some of yesterday’s strong performance to stand 0.3% lower.
