The UK bond market tumbled, driving long-term bond yields back to the highest in nearly three decades, as speculation over Keir Starmer’s future as prime minister renewed concern about the weakened state of Britain’s finances.
Gilts fell across the board, with the 30-year yield briefly touching 5.81 per cent, the highest since 1998. The pound slid 0.6 per cent against the dollar to $1.3523 (€1.15).
Shares indexes globally fell as US inflation climbed and oil gained for a third straight day as hopes faded for a deal to get ships moving through the Strait of Hormuz.
In April, US consumer prices (CPI) rose sharply for a second straight month, resulting in the largest annual increase in inflation in nearly three years, bolstering expectations that the Federal Reserve would keep interest rates unchanged for a while.
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The US war on Iran has driven oil prices higher, resulting in more expensive gasoline, diesel and jet fuel. Economists expect to see second-round effects in the months ahead.
Dublin
Fragile market sentiment anchored most of the big hitters on the Irish stock exchange. The upward trend in oil prices saw Ryanair shares rise nearly 2 per cent to €22.85.
The budget carrier announced it was shutting another European base and cancelling routes across six countries this winter, citing higher airport charges and taxes.
Among the other fallers were AIB and Bank of Ireland, down 1 per cent and 1.8 per cent respectively. Food giants Kerry Group and Glanbia somewhat bucked the trend to finish the session up.
Europe
European shares dropped on renewed concerns over the war in Iran after US president Donald Trump cast doubt on the ceasefire.
In earnings news, Siemens Energy retreated 2.3 per cent after Bernstein analysts noted weakening margins at the company’s gas unit.
Brent crude climbed 1.9 per cent to about $106 a barrel after Trump said the agreement with Iran was on “massive life support” following his rejection of Tehran’s latest peace offer.
European stocks have been supported by a solid earnings season so far, though concerns remain that a prolonged Middle East conflict is driving energy prices higher and stoking inflation. The Stoxx 600 index is up 2.3 per cent so far this year, lagging behind an 8.3 per cent rise in the S&P 500.
London
Stocks struggled on Tuesday, although blue chips proved resilient, amid a triple whammy of domestic political strife, surging US inflation and a lack of progress in the Middle East.
The FTSE 100 closed down just 4.11 points at 10,265.32.
Starmer defied calls for him to quit as UK prime minister, despite a growing number of Labour MPs demanding that he steps aside.
“The Labour Party has a process for challenging a leader and that has not been triggered,” Starmer told ministers during talks over his future. He was pointing to the fact no one had stepped forward to challenge him yet.
Banks sold off, amid reports of a possible windfall tax on the sector should there be a change at the top of the Government.
NatWest fell 3.2 per cent, Lloyds Banking Group dipped 4.4 per cent and Barclays declined 3.6 per cent.
Meanwhile, the surging bond yields weighed on interest rate-sensitive housebuilders, with Barratt Redrow down 4.1 per cent and Taylor Wimpey 2.4 per cent lower.
New York
The S&P 500 and the Nasdaq pulled back from record highs on Tuesday, with technology stocks leading declines, after a hotter-than-expected inflation report and stalled efforts to resolve the Middle East conflict weighed on sentiment.
US consumer prices rose at a brisk pace for a second straight month in April, pushing annual inflation higher and reinforcing expectations that the Federal Reserve will keep interest rates unchanged for longer.
While a strong earnings season has helped underpin market sentiment in recent weeks, investors remained on edge as negotiations between Washington and Tehran have shown little sign of progress.
Technology stocks were a big drag on the markets on Tuesday, with chip stocks that have skyrocketed in recent days falling sharply.
The Philadelphia SE Semiconductor index tumbled almost 6 per cent but still remained up about 50 per cent so far this quarter. The sector was also knocked by news that South Korea’s presidential policy adviser, Kim Yong-beom, floated an idea of “citizens dividend”, as he argued in a social media post that excess earnings in the era of AI should be redistributed to all citizens.
Intel tumbled 9.7 per cent after climbing more than 17 per cent over the previous two sessions, while Qualcomm dropped 13.7 per cent after hitting a record high on Monday. – Additional reporting by Reuters
