London’s FTSE 100 slumped to a two-month low on Tuesday, dropping about 0.6% to 10,634.49 by 1000 GMT, while the FTSE 250 lost 0.46%. Germany’s DAX fell 0.36% and France’s CAC 40 declined 0.64%. Sterling slipped 0.21% to $1.3472. Banks and investment firms led the decline, with Standard Chartered down 1.7% and Aberdeen off 2.6%.
Brent crude pushed above $108 a barrel, adding to a roughly 20% rise since the start of September. A Saudi East-West pipeline outage disrupted supply, and ING analysts said prices could remain “well supported” for several weeks. Vessel transits through the Strait of Hormuz fell to just four on Monday from ten, according to Kpler data cited by Reuters. WTI crude also rose 1.7% to $103.09. Normally higher oil would favour the FTSE 100 because of its large energy weighting, but traders increasingly treated the move as an inflation shock.
UK payrolled employment fell 26,000 in August, following a revised 19,000 decline in July, while unemployment held at 4.9% for a fourth straight month. Vacancies dropped to 702,000, the lowest outside the pandemic in over a decade. Annual wage growth including bonuses eased to 3.9% from 4.2% in June. Capital Economics said the weaker labour data supports the view that inflation pressures from higher energy costs will remain limited, and there is a reasonable chance the Bank of England will not raise rates from 3.75% this week or at all. ING expects a 6-3 vote to hold Bank Rate.
However, bond markets reflected acute inflation anxiety. The 30-year gilt yield traded around 5.91%, close to levels last seen in 1998, while the 10-year yield hit its highest since 2007. The US 10-year Treasury moved above 5%, amplifying pressure on global risk assets. Markets moved towards possible additional tightening by November, while reports suggested the Bank may stop selling 20- and 30-year gilts and slow quantitative tightening. Grocery inflation rose to 2.3% in the four weeks to September 6. On the corporate side, Wickes jumped on stronger trading, Trustpilot slumped despite revenue up 23% to $151.4 million, and Kier Group reported full-year revenue of £4.39 billion. Gold futures fell 0.52% to $4,328.87, with ING warning bullion is “vulnerable” ahead of the Fed decision. A parallel debate over AI safety, with Anthropic CEO Dario Amodei calling for stronger safeguards and President Trump opposing slower development, added to broader market unease.
