FTSE falls as gilt yields keep rising and dashed US rate cut hopes hit stocks

The FTSE 100 fell on Monday amid continued market jitters over rising public borrowing costs, and as expectations for further interest rate cuts by the Federal Reserve were slashed.

The yield on a 10-year gilt was about 4.9%, meaning borrowing costs remain at their highest point since 2008.

Bond yields move inversely to prices. When they rise it means it is more expensive for governments to borrow money.

The FTSE 100 index fell 24.3 points to finish the day at 8,224.19, or 0.29% down.

Danni Hewson, head of financial analysis at AJ Bell, said: “Much of what is happening with borrowing costs is outside of the Government’s control but with the Prime Minister being asked questions about how much faith he has in his Chancellor after only six months in the job, muck is sticking and attempts to change the narrative aren’t working.”

Friday’s strong jobs data from the US also prompted traders to pare back hopes of interest rate cuts from the Fed this year.

“Following the blowout jobs report, we now think the Fed cutting cycle is over,” said Bank of America.

In Europe, France’s Cac 40 closed 0.30% lower, and in Frankfurt the Dax was down 0.41%.

On Wall Street, the S&P 500 had dropped about 0.39%, and the Dow Jones was up 0.38% by the time European markets closed.

Meanwhile, turbulence in the UK bonds market continued pushing the pound to slump in value.

The pound was down 0.29% against the US dollar, continuing last week’s falls, at 1.217 on Monday.

Sterling was also down about 0.02% against the euro at 1.191.

In company news, recruitment firm Page Group revealed more role cuts as it said the jobs market had weakened further across Europe.

The company also cautioned that final quarter profits for 2024 were at the lower end of expectations, revealing that profits fell 16.3% year-on-year in the UK.

It revealed further role reductions as its fee-earner workforce fell by another 2.4% – or 130 positions – to 5,370 during the quarter, but it added 49 back office roles globally.

Shares fell 3.15% on Monday.

In oil markets, the price of Brent crude oil rose by 1.48%, to about 81 US dollars per barrel.

The biggest risers on the FTSE 100 were Intermediate Capital, up 46p to 2072p, Natwest Group, up 7.3p to 381.7p, AB Foods, up 31.5p to 1963p, Centrica, up 2.1p to 135.85p, and Glencore, up 5.25p to 363.95p.

The biggest fallers on the FTSE 100 were IAG, down 11.3p to 304.6p, Fresnillo, down 23.5p to 644.5p, Rightmove, down 20.6p to 624.8p, easyJet, down 13.6p to 494.2p, and Diageo, down 55p to 2391.5p.