Source: Sharecast
The FTSE 100 closed down 0.4% at 10,658.13, while Brent crude was up 3% at $108.85 a barrel and West Texas Intermediate was 4.5% higher at $105.90 following reports of further Houthi strikes on Saudi Arabia and Iranian attacks on ships in the Gulf.
Danni Hewson, head of financial analysis at AJ Bell, said: "Government borrowing costs have come back under pressure today as global bond yields on 10-year debt hit highs not seen since 2007.
"The benchmark US Treasury briefly topped at 5.04% and the UK’s 10-year gilt yield at 5.47%, as investors are rattled by concerns about the rising price of energy ahead of interest rate decisions from the Fed and the Bank of England.
"Global markets have also struggled to find momentum, held back by continued questions about the future of AI and whether the pace of its expansion needs to slow. Governments will need weigh up the need to put in guardrails against the practicalities of doing so, as well as the potential that any checks could undermine economic growth.
"Donald Trump’s stance that ‘whoever wins AI, wins’ has settled some investor nerves. Some of yesterday’s fallers have reversed course, with investors potentially spotting an opportunity to buy the dip. But it hasn’t been enough to overcome today’s primarily risk-off sentiment ahead of tomorrow’s anticipated rate hike from the Federal Reserve."
On home shores, figures from the Office for National Statistics showed the unemployment rate remained at 4.9% in the three months to July, versus expectations for an uptick to 5%.
Meanwhile, the number of payrolled employees fell by 26,000 between July and August and by 145,000 on the year, to 30.2m.
Total pay growth including bonuses eased to 3.9% in May to July from 4.2% in the previous three months, while regular pay growth excluding bonuses was unchanged at 3.5%.
Annual average regular earnings growth was 6.3% for the public sector and 2.9% for the private sector.
The data also showed that the number of vacancies in June to August 2026 fell by 8,000 to 702,000, compared with March to May.
Liz McKeown, director of economic statistics at the ONS, said: "The labour market remains broadly stable, with employment and unemployment rates largely unchanged in the latest period. However, payrolled employee numbers continue to edge down, with falls over the past year particularly evident in the retail and hospitality sectors.
"Regular wage growth has remained relatively stable in recent months, while total pay growth, which includes bonuses, has eased and was last lower nearly six years ago. There remains a notable difference between public and private sector pay growth, with public sector figures continuing to be affected by the timing of NHS pay awards this year."
McKeown said vacancies remain at their lowest level outside the pandemic period for more than a decade, with smaller businesses continuing to report that increased labour costs are affecting hiring decisions.
Richard Hunter, head of markets at Interactive Investor, said that as with the Federal Reserve, the last piece of the jigsaw for the UK central bank before its rate decision on Thursday will be the release of the consumer price index report tomorrow, where inflation is expected to have accelerated to 3.1% in August from 2.9% in July.
"Unlike the Fed however, where a hike is priced in as a done deal this week, the consensus remains that the Bank of England will stand pat at this meeting although a rise remains on the table before the year is out given relentless inflationary concerns emanating from energy prices in particular," he said.
In equity markets, software stocks - which benefited on Monday from the slump in AI-related shares - were among the worst performers. LSEG, Relx and Experian all fell.
Trustpilot posted a rise in first-half profit and revenue and said it was on track to meet full-year guidance, but shares tumbled as the online review website acknowledged a couple of accounting issues.
On the upside, defence firms Babcock and BAE Systems shot up. Hewson said the sector was benefiting "as global conflicts escalate amid reports that a Russian warship fired flares at a Danish military helicopter".
"Pressure is expected to continue to mount on Chancellor John Healey to do more to speed up additional defence spend in the UK," she said. "But the Treasury has plenty of other demands to meet, including what looks set to be an inflation busting 3.9% jump in the state pension next year."
DIY chain Wickes rallied after saying it was on track to meet expectations of a 10% jump in adjusted annual profit despite an uncertain consumer environment. The company posted a 1.1% rise in earnings to £27.6m for the six months to 27 June. Like-for-like sales rose 0.7%.
Kier Group also advanced as it said FY27 earnings were set to be at the top end of the board’s expectations and announced it will not be making any more investment in new property developments as it focuses on its core businesses of infrastructure and construction.
Market Movers
FTSE 100 (UKX) 10,658.13 -0.37%
FTSE 250 (MCX) 23,818.74 -0.07%
techMARK (TASX) 6,023.74 0.32%
FTSE 100 - Risers
BAE Systems (BA.) 2,006.00p 3.40%
Babcock International Group (BAB) 993.60p 3.39%
Shell (SHEL) 3,652.50p 1.97%
British Land Company (BLND) 395.60p 1.75%
Kingfisher (KGF) 293.50p 1.70%
BP (BP.) 580.30p 1.59%
Airtel Africa (AAF) 349.40p 1.51%
Legal & General Group (LGEN) 294.30p 1.48%
Admiral Group (ADM) 3,888.00p 1.36%
Persimmon (PSN) 1,098.50p 1.34%
FTSE 100 - Fallers
London Stock Exchange Group (LSEG) 8,200.00p -3.73%
IG Group Holdings (IGG) 1,309.00p -2.68%
Glencore (GLEN) 576.00p -2.65%
Relx plc (REL) 2,536.00p -2.57%
Abrdn (ABDN) 241.00p -2.35%
Antofagasta (ANTO) 3,501.00p -2.18%
HSBC Holdings (HSBA) 1,503.80p -2.15%
Fresnillo (FRES) 2,851.00p -2.09%
Diageo (DGE) 1,609.00p -2.07%
Experian (EXPN) 2,800.00p -2.03%
FTSE 250 - Risers
Wickes Group (WIX) 191.20p 8.27%
Oxford Biomedica (OXB) 461.00p 4.77%
Kier Group (KIE) 257.60p 3.87%
Ithaca Energy (ITH) 293.20p 3.79%
Watches of Switzerland Group (WOSG) 646.50p 3.03%
Currys (CURY) 149.50p 2.89%
Oxford Nanopore Technologies (ONT) 158.30p 2.79%
Johnson Matthey (JMAT) 2,276.00p 2.61%
IP Group (IPO) 67.30p 2.44%
Avon Technologies (AVON) 1,732.00p 2.00%
FTSE 250 - Fallers
Trustpilot Group (TRST) 213.00p -18.64%
CMC Markets (CMCX) 687.00p -6.78%
Wizz Air Holdings (WIZZ) 931.50p -4.75%
Globaldata (DATA) 56.10p -4.27%
Plus500 Ltd (DI) (PLUS) 3,434.00p -4.02%
Hays (HAS) 65.25p -3.40%
Ceres Power Holdings (CWR) 359.20p -3.28%
Pantheon Infrastructure (PINT) 114.00p -2.90%
Auction Technology Group (ATG) 432.60p -2.79%
Trainline (TRN) 196.80p -2.77%