London markets underperformed global peers on Wednesday, as political instability surrounding UK Chancellor Rachel Reeves shook investor confidence, pushing bond yields higher and knocking the pound lower.
The FTSE 100 dipped 0.1% to 8,774.69, with gains in mining stocks helping limit broader losses. But housebuilders fell sharply, and mid-caps fared worse: the FTSE 250 slumped 1.3% to 21,452.49, while the AIM All-Share fell 0.7% to 767.76.
Bytes Technology tumbled 33% after flagging weaker near-term profit expectations amid a sluggish macro environment and customer spending delays.
Greggs dropped 15% as scorching June temperatures dented baked goods sales, offsetting solid cold drinks demand. The bakery chain now expects first-half operating profit to fall below last year’s levels.
Topps Tiles climbed despite broader market weakness, rising 8.8%. The tile retailer posted a sharp acceleration in Q3 sales and said margins are set to improve, though flagged an added £4 million in annual cost pressures.
Bond markets were on edge as questions mounted over how Labour will fill the near-£5 billion fiscal hole created by its welfare U-turn. Yields on 10-year gilts jumped to 4.68%, up sharply from 4.45% on Tuesday.
Despite Prime Minister Keir Starmer’s refusal to publicly back Rachel Reeves, No 10 insisted she is “going nowhere” and remains Chancellor. Yet the market reaction suggests investors aren’t convinced.
Berkeley Group led the property rout, dropping 7.9%, as housebuilders and rate-sensitive stocks came under pressure from rising borrowing costs, even as the Bank of England is expected to cut rates next month.
While Wall Street stayed afloat, the Dow was flat, the S&P 500 up 0.2%, and the Nasdaq gained 0.7%, the UK’s political and fiscal clouds left domestic equities firmly under the weather.