London open: Stocks gain as sterling drops amid bond market selloff

(Sharecast News) - London stocks rose in early trade on Thursday as the selloff in the bond market continued and sterling slumped. At 0900 GMT, the FTSE 100 was up 0.5% at 8,287.87, while the pound was at its lowest level against the dollar since 2023, down 0.6% at 1.2286 amid the bond market selloff.

US markets will be closed for a national day of mourning for former president Jimmy Carter, who died in December.

Lee Hardman, currency economist at MUFG, said sterling weakness reflects more investor unease about the ongoing selloff in the gilt market, which has captured more attention this week after the 10-year and 30-year gilt yields rose to their highest levels since October 2008 and August 1998 respectively.

"It has drawn some comparisons to the sell-off following former PM Liz Truss' ill-fated mini-Budget in autumn 2022," he said, adding, however, that the scale of the of the selloff is currently significantly smaller.

"The 30-year gilt yield increased by around 300bps between the lows from August 2022 and from highs September 2022," he said.

"The recent move higher in gilt yields also appears broadly in line with the similar moves higher in other bond markets. The 10-year and 30-year gilt yields have increased by around 55 and 60bps respectively since the end of November. In comparison, the 10-year and 30-year US Treasury yields have increased by around 50bps and 55bps respectively. Similarly, 10-year and 30-year German government bond yields have increased by around 45bps.

"It would suggest that the gilt market selloff is mainly driven by the broader repricing of long end bonds as investors seek more compensation for taking on duration risk rather than UK specific factors at the current juncture.

"Having said that the rising cost of UK government borrowing if sustained will put pressure on the government to tighten fiscal policy."

Investors were also mulling the latest retail industry data, which showed that shop prices continued to fall in December, driven by heavy discounting.

According to the BRC-NielsenIQ shop price index, deflation was 1.0%, compared to deflation of 0.6% in the previous month.

Within that, non-food deflation was -2.4%, its most since April 2021. Food inflation was 1.8%, unchanged on November but still the lowest rate since December 2021.

Helen Dickinson, chief executive of the British Retail Consortium, said: "Retailers discounted heavily for Black Friday, as they attempted to make up for weaker sales earlier in the year.

"However, the later Black Friday timing brought many of the non-food discounts into the measurement period, making non-food prices look more deflationary than the underlying trend."

Black Friday was on 29 November last year, compared to 24 November in 2023. Retailers tend to discount heavily in the build-up to the event and then maintain the cheaper prices into the following week.

Dickinson continued: "As retailers battle £7bn of increased costs in 2025, including higher employer NI, National Living Wage and new packaging levies, there is little hope of prices going anywhere but up."

In equity markets, retailers were under the cosh.

Marks & Spencer slumped despite the food and clothing retailer posting a 6.4% rise in UK third quarter like-for-like sales after a better-than-expected performance over the key Christmas period.

The company said sales came in at £3.9bn. Food revenue in the 13 weeks to 28 December increased 8.9% and 1.9% for home, clothing and beauty against expectations on 7.8% and 0.7% respectively.

Tesco was also sharply lower even as it reported a solid uptick in sales growth over the key Christmas trading period, and posted its highest market share in eight years.

Discount retailer B&M European Value Retail slid even as it reported third-quarter revenue growth of 2.8% year-on-year, driven by a strong seasonal performance in the UK and robust growth in France, and declared a 15p per share, or £151m, special dividend.

Bakery chain Greggs retreated as it said it jumped past the £2bn sales mark in 2024, but reported a slowdown in like-for-like sales growth for the fourth quarter as weaker consumer confidence dented footfall on the high street.

Ferrexpo was a bright spot, with shares higher as it said there had been a surge in annual production, its best result since Russia invaded Ukraine, despite the ongoing "challenging" conditions.

Market Movers

FTSE 100 (UKX) 8,287.87 0.45% FTSE 250 (MCX) 19,796.48 -0.78% techMARK (TASX) 4,592.20 -0.23%

FTSE 100 - Risers

Anglo American (AAL) 2,439.50p 3.30% Antofagasta (ANTO) 1,713.50p 2.97% Rio Tinto (RIO) 4,819.00p 2.07% Fresnillo (FRES) 659.00p 1.70% Shell (SHEL) 2,622.00p 1.65% Pershing Square Holdings Ltd NPV (PSH) 4,178.00p 1.51% Melrose Industries (MRO) 562.80p 1.37% Smith (DS) (SMDS) 561.50p 1.35% London Stock Exchange Group (LSEG) 11,765.00p 1.29% Smurfit Westrock (DI) (SWR) 4,252.00p 1.29%

FTSE 100 - Fallers

Marks & Spencer Group (MKS) 354.00p -6.05% Sainsbury (J) (SBRY) 261.80p -3.75% Admiral Group (ADM) 2,531.00p -3.03% Berkeley Group Holdings (The) (BKG) 3,630.00p -2.84% Associated British Foods (ABF) 1,944.50p -2.82% Next (NXT) 9,410.00p -2.79% Kingfisher (KGF) 230.00p -2.25% Taylor Wimpey (TW.) 108.15p -1.90% Phoenix Group Holdings (PHNX) 482.00p -1.83% JD Sports Fashion (JD.) 95.78p -1.80%

FTSE 250 - Risers

Ferrexpo (FXPO) 97.50p 5.06% Carnival (CCL) 1,771.00p 2.05% Endeavour Mining (EDV) 1,506.00p 1.41% Elementis (ELM) 138.40p 1.32% Harbour Energy (HBR) 267.20p 1.17% Diversified Energy Company (DEC) 1,357.00p 1.12% Syncona Limited NPV (SYNC) 91.00p 1.11% JPMorgan Indian Investment Trust (JII) 1,016.00p 0.99% Asia Dragon Trust (DGN) 418.00p 0.97% Hochschild Mining (HOC) 224.00p 0.90%

FTSE 250 - Fallers

B&M European Value Retail S.A. (DI) (BME) 314.00p -9.93% Greggs (GRG) 2,372.00p -9.67% Hays (HAS) 71.85p -4.83% Raspberry PI Holdings (RPI) 564.25p -4.04% Vistry Group (VTY) 518.00p -3.54% W.A.G Payment Solutions (WPS) 77.20p -3.50% Just Group (JUST) 145.20p -3.33% Workspace Group (WKP) 444.50p -3.16% Trustpilot Group (TRST) 274.50p -3.00% Helios Towers (HTWS) 87.50p -2.78%