The FTSE 100 was trading at 10,318.33 by 09:55 GMT on Wednesday, up 0.58%, as gilt yields pulled back from their worst levels of the week and investors shifted their attention toward Donald Trump’s high-stakes arrival in Beijing.
The index had closed marginally lower at 10,265 on Tuesday, when a perfect storm of political crisis and rising oil prices dragged it down as much as 1% in early trading before a partial recovery.
Gilts take a breather
UK borrowing costs are easing modestly this morning after a brutal session yesterday, when 10-year gilt yields spiked to 5.13% – their highest since 2008 – and the 30-year surged to nearly 5.8%, a level not seen since 1998.
The selloff was driven by mounting political and geopolitical pressure, with more than 80 Labour MPs openly demanding Starmer’s resignation following the party’s poor local election results, while oil prices extended their rally on fading hopes of an Iran ceasefire.
Markets are calmer this morning, though only conditionally so. Sterling has recovered to $1.3544 from $1.3505 at Tuesday’s close, and analysts are careful not to call an all-clear while the political situation remains unresolved.
Starmer digs in ahead of King’s Speech
The prime minister told his cabinet on Tuesday that a Labour leadership challenge had not been triggered and that the country expected his government to get on with governing. His supporters believe he has seen off an immediate threat from Health Secretary Wes Streeting, who is not thought to have gathered the 81 MP signatures required to formally launch a bid.
Wednesday’s state opening of parliament is now the test, with King Charles due to deliver a King’s Speech laying out dozens of pieces of legislation – a moment Starmer’s team hopes will reframe the political narrative around delivery rather than internal revolt.
Miners lead the charge
The clearest beneficiaries this morning are the miners, who are doing the heavy lifting on the FTSE 100 leaderboard.
Anglo American is up 3.7%, with Antofagasta adding 3.2% and Rio Tinto gaining 3.0%, as gold pushes higher to $4,700 an ounce and base metals find support from optimism around the Trump-Xi summit. Intertek continues to hold firm near the top, carrying over Tuesday’s 6.75% jump on the back of EQT’s sweetened £9.4 billion takeover approach.
On the losing side, Entain is down 3.2% and Spirax Group has shed 2.4%, while IAG slips 1.6% as airlines continue to feel the drag of elevated oil prices.
Trump touches down in Beijing
The summit between Trump and Xi Jinping is the dominant macro event for markets today, with trade, artificial intelligence and Taiwan all on the agenda – but Iran is the thread investors are watching most closely.
Trump told reporters on Tuesday that he expected a “long talk” with Xi about Iran, noting that China is the largest buyer of Iranian oil and that progress on the Strait of Hormuz would have an immediate impact on energy markets.
Brent crude has eased to around $106 a barrel this morning from $108 late Tuesday, offering some relief to bond markets where oil’s inflation implications have been a significant part of the upward pressure on yields. Trump insisted the inflation spike from the war was “just short term” and that oil prices would fall once hostilities ended – a claim markets are treating with considerable scepticism.
US inflation adds to the pressure
Wednesday also brings US producer price data, which will be watched closely after Tuesday’s consumer price reading came in at 3.8% year-on-year – a three-year high that spooked Wall Street and left the Dow up just 0.1% while the S&P 500 fell 0.2% and the Nasdaq dropped 0.7%.
The IEA oil market report is also due, which could move energy stocks sharply in either direction depending on how it characterises the supply outlook amid the Hormuz disruption.