UK shares fall as rising bond yields weigh

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imageEconomy12 hours ago (Mar 05, 2021 09:50)

© Reuters. FILE PHOTO: A broker looks at financial information on computer screens on the IG Index trading floor

By Shivani Kumaresan

(Reuters) – British shares fell on Friday as rising bond yields globally sparked fears of higher inflation, while another slowdown in domestic house price growth also weighed on the market.

The blue-chip FTSE 100 index fell 0.8%, with consumer staples and industrials stocks, including Diageo (LON:DGE) Plc, British American Tobacco (LON:BATS), BAE Systems (LON:BAES), and International Consolidated Airlines Group (LON:ICAG), leading declines.

Banking and mining stocks, mainly Prudential (LON:PRU) Plc, Lloyds (LON:LLOY) banking, and BHP, were also among the biggest laggards.

A weaker overnight finish on Wall Street after Federal Reserve Chair Jerome Powell’s remarks failed to rein in concerns over rising U.S. Treasury yields spilled over to Asian equities earlier in the day. [MKTS/GLOB]

“What the Fed is basically saying is the rise in treasury yields we see just reflects a stronger economic recovery and that the financial conditions are still very easy,” said James Smith, an economist at ING.

“(This) implies the yields can go further higher from here and that potentially make for further turbulence for global risk assets,” he said.

The FTSE 100 has risen 2.9% so far this year on optimism about a speedy economic recovery, aided by faster vaccine rollouts, but fears that rising inflation would lead to higher interest rates have undermined investor sentiment.

British house price growth slowed for a third month running in February, a further sign that the pandemic boom in Britain’s housing market is fading, mortgage lender Halifax said.

The UK domestically focused mid-cap FTSE 250 index fell 0.8%, dragged down by consumer discretionary and financial stocks.

Equipment rental company Aggreko (LON:AGGK) rose 1.4%, as it backed a 2.32 billion pound ($3.22 billion) buyout offer from private equity firms TDR Capital LLP and I Squared Capital.

London Stock Exchange Group (LON:LSEG) fell 5.0% to the bottom of the blue-chip index, even after announcing a 7% dividend increase as the integration of its $27 billion acquisition of data and analytics company Refinitiv stepped up a gear.

UK shares fall as rising bond yields weigh

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