FTSE drops as gilt yields soar

The FTSE 100 fell as markets opened after the weekend, as the interest that the Government pays on its loans rose to the highest point since the Bank of England stepped in two weeks ago to calm markets.

The yield on the 10-year Government gilts, essentially an IOU that the Treasury writes to its lenders, reached as high as 4.6% on Monday.

It was a rise from 4.2% on Friday and came after the Chancellor Kwasi Kwarteng announced he would set out further fiscal plans on Halloween.

Yields had soared after the Chancellor’s last fiscal event less than three weeks ago – hitting about 4.5% on September 27.

It forced the Bank to step in to avoid a collapse in some pension funds, which could have spilled over into the rest of the financial system.

While yields were rising, the FTSE 100 was going in the other direction, giving back 0.5% of its value on Monday and failing to push above the symbolic 7,000-point mark.

By the end of the day the FTSE closed down 32 points, ending at 6,959.

Sterling also fell, down 0.4%, as one pound could buy a little over 1.1 dollars – low, but above recent troughs.

By the end of the day markets in Europe were also down, although Germany’s Dax only barely closed in the red, giving back 0.06 points to end at 12,272.94. France’s Cac 40 fell by 0.5%.

On Wall Street the S&P 500 was also down by half a per cent, while the Dow Jones had dropped 0.1% shortly after European markets closed.

In company news, Hollywood Bowl Group said that it has beaten earnings targets over the last year as people went back to its venues following the pandemic.

The bowling company said that earnings rose 40% while revenue more than doubled to £185 million. After initially jumping in early trading, shares closed up 2.2%.

Elsewhere, clothes seller Quiz said that shoppers are starting to be affected by the increasing cost of living. The business said that half-year sales had jumped by more than 37%, which was better than expected.

But since the start of the current quarter things have looked less rosy, with revenue growth easing.

Shares in the fashion business closed down 7%.

The biggest risers on the FTSE 100 were DS Smith, up 29.3p to 271.1p, Smurfit Kappa, up 165p to 2,617p, Mondi, up 56.5p to 1410p, Kingfisher, up 6.6p to 212.2p, and M&G, up 4.75p to 170.55p.

The biggest fallers on the FTSE 100 were Haleon, down 8.15p to 271.15p, Centrica, down 1.9p to 69.04p, Rolls-Royce, down 2p to 68.89p, Segro, down 18p to 720p, and Diageo, down 88p to 3,646p.