LONDON MARKETS: FTSE 100 Drops After Rising Bond Yields Spur Selloff On Wall Street
25 April 2018 - 11:02AM
Dow Jones News
By Carla Mozee, MarketWatch
U.K. stocks dropped Wednesday, with the blue-chip market's run
of wins at risk after elevated U.S. bond yields triggered a selloff
on Wall Street.
How markets are performing
The FTSE 100 index fell 0.5% to 7,388.53, led by losses for
commodity and industrial stocks, but health care and consumer goods
shares were higher. The London benchmark on Tuesday rose 0.4%
(http://www.marketwatch.com/story/ftse-100-looks-for-6th-win-as-oil-shares-rise-pound-falls-2018-04-24)
to log its sixth consecutive gain, the longest winning streak since
mid-May 2017, according to FactSet data. Tuesday's close also
marked the index's first close above 7,400 since early
February.
The pound bought $1.3939, down from $1.3978 late Tuesday in New
York. In the fixed-income market, the yield on the 10-year gilt
rose 2 basis points to 1.56%, according to Tradeweb.
Read:Here's the threat to the stock market from rising bond
yields
(http://www.marketwatch.com/story/heres-the-threat-to-the-stock-market-from-rising-bond-yields-2018-04-24)
What's driving the market
U.K., European and Asian stock markets took their cues from a
slide in U.S. stocks on Tuesday
(http://www.marketwatch.com/story/dow-shapes-up-to-break-losing-streak-but-earnings-could-kill-the-buzz-2018-04-24),
which was led by declines in shares of industrial, basic materials
and technology companies.
U.S. stocks swung lower after the U.S. 10-year Treasury yield
climbed and touched the psychologically important 3% level for the
first time in four years. Meanwhile, shares of industrial
heavyweights dropped, with 3M Co. shares (MMM) plunging after the
company trimmed its full-year outlook
(http://www.marketwatch.com/story/3ms-stock-tumbles-into-a-bear-market-after-most-disappointing-results-in-over-a-decade-2018-04-24).
The Dow Jones Industrial Average sank 424 points, or 1.7%, and the
S&P 500 index gave up 1.3%.
U.S. bond yields have been rising on expectations that
inflationary pressures could prompt the Federal Reserve to ramp up
the pace of rate hikes, which would increase borrowing costs for
companies and consumers. European bond yields have also been
creeping higher. Higher yields can weigh on stocks as bonds start
to offer better returns than equities and raise borrowing
costs.
Read:What it means for the market that the U.S. 10-year
government bond yield hit 3%
(http://www.marketwatch.com/story/heres-what-it-means-for-the-market-that-the-us-10-year-yields-3-2018-04-24)
What are strategists saying?
"We are in the midst of earnings season, which continues to be
strong, but the market appears to be fully priced and in this
environment of sharply rising bond yields, the fear is driving risk
appetite backwards," said Hantec Markets analyst Richard Perry in a
note.
"Bond markets will now be eying the January 2014 high on the
10-year yield, which is a peak of 3.04%. The question is also
whether these market moves begin to show a decisive safe-haven bias
once more similar to the February fears," said Perry, noting those
moves were driven by a sharp increase in U.S. wage-growth data.
Share movers
Antofagasta PLC (ANTO.LN) fell 3.6% after the miner said
first-quarter copper production
(http://www.marketwatch.com/story/antofagasta-copper-output-down-holds-to-guidance-2018-04-25)
fell 10.5% due to lower grades, but that guidance for the year is
unchanged.
Whitbread PLC shares (WTB.LN) turned lower, losing 1.1% after
the company said it will spin off Costa Coffee
(http://www.marketwatch.com/story/whitbread-to-spin-off-costa-coffee-business-2018-04-25-24854827)
into a separate business. Whitbread said it will remain the owner
and operator of its Premier Inn hotel business.
Lloyds Banking Group PLC shares (LLOY.LN) were down 0.4% after
the lender posted a 23% rise in first-quarter pretax profit.
(http://www.marketwatch.com/story/lloyds-pretax-profit-up-23-as-ppi-provision-falls-2018-04-25)
Shire PLC shares (SHPG) (SHPG) were down 0.9%, but had traded
higher early Wednesday after the drug maker recommended
shareholders accept
(http://www.marketwatch.com/story/shire-seems-ready-to-accept-latest-takeda-offer-2018-04-24)
an improved takeover bid from Takeda Pharmaceutical Co.
(4502.TO).
(END) Dow Jones Newswires
April 25, 2018 04:47 ET (08:47 GMT)
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