Source: Sharecast
The FTSE 100 was down 0.7% at 8,747.01.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "The growing mountain of US debt is causing ripples of worry across financial markets, with signs investors are baulking at financing the Trump administration. These concerns have hit sentiment in Europe, given the repercussions that financial difficulties in the world’s largest economy would have on the global economy.
"It seems that every time Trump heralds a policy as ‘beautiful’ it has an ugly effect on financial markets. First it was tariffs, now it’s the huge tax and spending bill. Bond investors are far from impressed by the proposals which would extend Trump’s 2017 tax cuts and boost military spending but cut welfare payments. The congressional Budget Office has forecast the proposals would add $3.8 trillion to the US’s $36.2 trillion debt mountain over the next decade.
"An auction of 20-year Treasuries saw very weak demand, indicating the wariness about White House policy. It comes after ratings agency Moody’s stripped the US of its AAA credit rating, due to concerns about the fiscal position. The bill has cleared a crucial committee stage hurdle and a vote on the bill’s passage through the House of Representatives is due later. The falling appetite for US debt can be seen in the spike in Treasury yields, with the 30-year note surging to more than 5.1% before retreating slightly, but it’s still hovering near highs not seen since October 2023."
On home shores, a survey out earlier showed the private sector remained in negative territory in May, although the pace of decline slowed.
The latest flash S&P Global UK PMI composite output index was 49.4, below the neutral 50.0 though it was an improvement on April’s 48.5.
A reading above 50.0 indicates growth, while one below it suggests contraction.
Within that, the services PMI business activity index pushed into positive territory, up from 49.0 to 50.2, but manufacturing stalled. The output index eased to 44.8 from 45.8, while the PMI was 45.1 compared to 45.4 a month earlier.
Business activity expectations for the coming year improved, however, up from the low seen in April. That was despite a faster reduction in new order intakes during the month.
Anecdotally, respondents were less concerned about the impact of US tariffs on longer-term domestic economic prospects, although global business uncertainty continued to weigh on confidence.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said: "After an awful April, businesses reported a milder May.
"Business confidence has rebounded from April’s recent low, which had seen confidence collapse to a degree not seen since the Truss budget of 2022, and price pressures have moderated after spiking higher.
"However, output still fell slightly when measured across all goods and services for a second successive month, hinting at the possibility of the economy contracting in the second quarter."
Matt Swannell, chief economic advisor to the EY Item Club, said: "The PMIs can be volatile from month-to-month, and the survey has been a poor leading indicator of official GDP growth in recent years. This is largely because the survey tends to pick up changes in mood better than changes in actual activity. Though GDP growth will likely slow in the second quarter, we think it will remain comfortably in positive territory."
Investors were also mulling the latest figures from the Office for National Statistics, which showed that government borrowing rose to £20.2bn in April, up £1bn on the same month a year ago and coming in above the £18bn expected.
It was the fourth-highest figure for April borrowing since record began in 1993.
The data also showed that borrowing for the year to March was £148.3bn. This is £11bn higher than the £137.3bn forecast by the Office for Budget Responsibility but £3.7bn lower than the initial estimate.
Elsewhere, a survey revealed that consumer sentiment strengthened in May after the UK secured a key trade deal with the US.
In equity markets, budget airline easyJet flew lower as it posted a first-half loss before tax of £394m, in line with consensus, and said forward bookings for the third quarter were 80% sold.
The company added that current bookings are supportive of performance meeting full-year consensus estimates, but it remained mindful that, "consistent with this stage each year, there is still an important booking period for peak summer to go".
DCC retreated as it traded without entitlement to the dividend, while Intertek and British Land lost ground after results.
BT Group nudged lower as it posted an unexpected fall in annual revenues and pointed to further declines over the coming year.
Bloomsbury Publishing tanked as the Harry Potter publisher said full-year pre-tax profit fell 22% to £32.5m.
Close Brothers fell as Shore Capital downgraded the shares to ‘hold’ from ‘buy’, saying the third-quarter update was a "a bit of a mixed bag".
On the upside, Convatec rallied as it hailed a strong start to the year and said it was on track to deliver targets.
Marks & Spencer was boosted by an upgrade to ‘buy’ at Jefferies.
Johnson Matthey surged as it said it had agreed to sell its Catalyst Technologies business to Honeywell for £1.8bn.
Toby Carvery owner Mitchells & Butlers advanced after saying it expects annual earnings to be at the top end of estimates, and that underlying sales in the last 10 weeks had risen 6%.
Market Movers
FTSE 100 (UKX) 8,729.33 -0.65%
FTSE 250 (MCX) 20,802.50 -0.70%
techMARK (TASX) 4,765.34 -0.40%
FTSE 100 - Risers
JD Sports Fashion (JD.) 85.64p 3.03%
Convatec Group (CTEC) 282.00p 2.47%
BAE Systems (BA.) 1,836.50p 0.96%
Rolls-Royce Holdings (RR.) 828.80p 0.53%
Tesco (TSCO) 382.20p 0.42%
Auto Trader Group (AUTO) 894.40p 0.34%
Marks & Spencer Group (MKS) 375.80p 0.29%
Reckitt Benckiser Group (RKT) 4,912.00p 0.29%
GSK (GSK) 1,433.50p 0.24%
Pershing Square Holdings Ltd NPV (PSH) 3,734.00p 0.21%
FTSE 100 - Fallers
easyJet (EZJ) 537.80p -4.75%
DCC (CDI) (DCC) 4,548.00p -4.73%
Smurfit Westrock (DI) (SWR) 3,283.00p -2.93%
Intermediate Capital Group (ICG) 2,008.00p -2.90%
Intertek Group (ITRK) 4,778.00p -2.89%
Persimmon (PSN) 1,328.00p -2.78%
Flutter Entertainment (DI) (FLTR) 17,810.00p -2.60%
Bunzl (BNZL) 2,380.00p -2.54%
Experian (EXPN) 3,792.00p -2.29%
Kingfisher (KGF) 302.80p -2.29%
FTSE 250 - Risers
Johnson Matthey (JMAT) 1,800.00p 29.59%
QinetiQ Group (QQ.) 465.40p 5.82%
Syncona Limited NPV (SYNC) 88.50p 3.15%
Lion Finance Group (BGEO) 6,640.00p 2.23%
Workspace Group (WKP) 416.50p 1.71%
TBC Bank Group (TBCG) 4,565.00p 1.33%
Investec (INVP) 497.40p 1.18%
Jupiter Fund Management (JUP) 80.10p 1.14%
Bakkavor Group (BAKK) 206.00p 0.98%
Currys (CURY) 125.40p 0.64%
FTSE 250 - Fallers
Bloomsbury Publishing (BMY) 548.00p -15.82%
Close Brothers Group (CBG) 339.60p -4.93%
Ocado Group (OCDO) 265.00p -4.37%
Grainger (GRI) 214.50p -4.03%
Ferrexpo (FXPO) 61.00p -3.79%
Hill and Smith (HILS) 1,852.00p -3.54%
British Land Company (BLND) 397.80p -3.35%
Tate & Lyle (TATE) 583.50p -3.23%
RHI Magnesita N.V. (DI) (RHIM) 2,870.00p -3.20%
Petershill Partners (PHLL) 209.50p -3.01%