The FTSE 100 staged an impressive fall to close out the week, sinking to an eight-week low after an initially promising start to the day.
The leading index closed the day down 63.84 points, or 0.91%, at 6963.64 – falling below the psychologically important 7,000 barrier. It is the first time it has fallen below 7,000 since July.
Michael Hewson, chief market analyst at CMC Markets UK, explained a bond market sell-off may be to blame, with UK five-year gilt yields rising to their highest levels since March 2020, and 10-year yields to a four-month high.
Bond yields rise as the price of the bonds fall.
He added: “It could be the recent headlines around new fiscal rules from the Chancellor of the Exchequer is exerting upward pressure on short term UK borrowing costs.
“While we’ve seen an afternoon sell off, with basic resources and industrials getting hit the hardest, some sectors have managed to outperform with the travel and leisure sector leading the gainers.”
Airlines and hotel groups enjoyed strong growth on hopes the UK Government will simplify travel restriction classifications.
British Airways owner IAG led the charge with shares closing up nearly 5% or 7.04p at 149.5p and Intercontinental Hotels up 90p at 4,650p.
But the sell-off in mining stocks dragged the index down, with Anglo American shares dropping 227.5p at 2,591p and BHP down 94.4p to 1,873.8p.
European markets saw similar falls to the FTSE, with the German Dax down 1.03% and the French Cac down 0.79%.
The pound was up 0.03% against the dollar at 1.375 and up 0.08% against the euro at 1.172.
In company news, hostel business Safestay said it has been the target of a “very early stage and highly conditional” approach from a potential buyer which could lead to the launch of a formal sales process.
PwC has been hired as an adviser, with other potential suitors asked to tap them up with offers. Investors welcomed the news, with shares up 2p to 22p.
Sticking with takeovers, renewables energy firm Good Energy said it would advise shareholders to reject an increased bid for the business from rival Ecotricity.
The increased offer of £66.6 million was said to remain too low by the company’s board and Good Energy said Ecotricity was an “unfit owner”, advising shareholders to reject it. Shares closed down 8p at 380p in a possible sign that investors think the deal will not become reality.
High street fashion giant Next announced a joint venture with US chain Gap to sell its clothes in concessions in some UK stores, following the latter’s closure of its British and Irish sites.
Next will also take over the running of Gap’s UK website to sell clothes direct to consumers. Shares in Next closed up 120p at 8,122p.
Infrastructure investment firm Pennon faced a setback in its attempts to buy Bristol Water, as the Competition and Markets Authority (CMA) said it would launch an investigation into whether the deal could reduce competition.
Shares in Pennon fell back 25p to 1,220p following the news.
And estate agent Foxtons unveiled a new chairman, Nigel Rich, who replaces Ian Barlow. His predecessor quit after eight years following a shareholder backlash where investors were critical of company salaries and dividend payments.
Shares in Foxtons closed up 0.6p at 52.8p.
The biggest risers on the FTSE 100 were IAG up 7.04p at 149.5p; Intercontinental Hotels up 90p at 4,650p; HSBC up 7.15p at 376.05p; Flutter up 290p at 15,315p and Rolls-Royce up 1.94p at 111p.
The biggest fallers were Anglo American down 227.5p at 2,591p; BHP down 94.4p at 1,873.8p; Weir down 82p at 1,703p; Ocado down 69p at 1,700p and Rio Tinto down 190.5p at 4,829.5p.