London midday: Stocks pop higher but borrowing costs surge amid selloff

(Sharecast News) - London stocks had popped a touch higher by midday on Wednesday, but 30-year borrowing costs hit their highest level in 25 years amid a global selloff, as worries about higher-for-longer rates rattled investors. The FTSE 100 was up 0.1% at 7,476.10.

Stocks in the US and Asia slid and US Treasury yields jumped after better-than-expected JOLTS job openings data sparked fears about interest rates.

Meanwhile, the yield on the 30-year UK government bond hit 5.115% on Wednesday morning, breaching the levels seen in the aftermath of Liz Truss's mini-budget and the highest since 1998.

Russ Mould, investment director at AJ Bell, said: "It feels gloomy right now with a 'higher rates for longer' assumption helping to sour sentiment.

"This is reflected in the selloff in bonds - with US government bond yields hitting levels last seen in 2007, not a year with particularly happy memories for investors.

"The most recent catalysts include the JOLTS job openings survey, which showed a surprisingly buoyant US labour market, and the uncertainty across the Atlantic created by a closely averted government shutdown and the shock ousting of Republican speaker of the House of Representatives Kevin McCarthy.

"Later today there is a PMI reading from America's services sector, with the market badly in need of an inline number which can help dial down some of the recent volatility. There will be similar hopes for Friday's influential non-farm payrolls release too.

"Given the unhelpful backdrop, the FTSE 100 was proving resilient in early trading on Wednesday."

On home shores, a survey out earlier showed that the services sector suffered its worst performance in eight months in September amid subdued demand and cutbacks to non-essential spending.

The headline seasonally-adjusted S&P Global/CIPS services PMI business activity index fell to 49.3 from 49.5 in August, coming in below the 50.0 mark that separates contraction rom expansion for the second month in a row.

This marked the lowest level since January, but was above the flash estimate of 47.2.

The seasonally-adjusted composite PMI printed at 48.5 in September, down from 48.6 the month before but above the flash estimate of 46.8.

Tim Moore, economics director at S&P Global Market Intelligence, said: "Service sector activity remained on a negative trajectory in September as cutbacks to non-essential business and consumer spending weighed on sales volumes. Although only modest and slower than indicated by the earlier 'flash' PMI reading, the downturn in UK service sector output was the greatest seen since the beginning of this year and stood in contrast to solid growth during the spring months.

"Survey respondents often suggested that a combination of elevated borrowing costs and subdued economic conditions had led to lower new business intakes. A renewed decline in export sales also acted as a headwind to order books during September, led by weaker demand across Europe. "

In equity markets, Tesco rallied as it hiked its retail profit and cash flow targets after a strong first half, with sales rising on the back of easing inflation.

Group sales excluding fuel were up 8.9% year-on-year to £30.7bn in the six months to 26 August, with inflation falling across the half and volume and sales mix trends ahead of expectations.

Spirent Communications tanked as it cut its near-term outlook, highlighting an "extremely challenged" telecommunications market and the fact its largest customers have delayed their expenditure and technology investments.

In broker note action, Aviva advanced after an upgrade to 'buy' from 'neutral' at Jefferies. Relx was lifted by an upgrade to 'buy' at Goldman Sachs, while Severn Trent was boosted by an upgrade to 'neutral' from 'underweight' at JPMorgan Cazenove.

Caterer Compass Group was higher after an upgrade to 'sector perform' at RBC Capital Markets, but Legal & General fell after a downgrade to 'hold' at Jefferies.

Market Movers

FTSE 100 (UKX) 7,476.10 0.08% FTSE 250 (MCX) 17,659.17 -0.11% techMARK (TASX) 4,118.89 -1.43%

FTSE 100 - Risers

Tesco (TSCO) 268.90p 3.89% Smurfit Kappa Group (CDI) (SKG) 2,730.00p 3.24% Smith (DS) (SMDS) 281.60p 2.17% International Consolidated Airlines Group SA (CDI) (IAG) 147.45p 2.14% Land Securities Group (LAND) 586.00p 2.12% Sainsbury (J) (SBRY) 252.90p 2.09% Aviva (AV.) 383.20p 2.02% Rentokil Initial (RTO) 599.80p 1.97% Compass Group (CPG) 2,023.00p 1.94% Mondi (MNDI) 1,356.50p 1.88%

FTSE 100 - Fallers

BAE Systems (BA.) 988.80p -2.36% Frasers Group (FRAS) 781.00p -2.01% Whitbread (WTB) 3,345.00p -1.93% Fresnillo (FRES) 526.60p -1.79% B&M European Value Retail S.A. (DI) (BME) 556.00p -1.59% Endeavour Mining (EDV) 1,519.00p -1.43% Airtel Africa (AAF) 120.20p -1.23% BP (BP.) 509.50p -1.09% Pershing Square Holdings Ltd NPV (PSH) 2,946.00p -0.87% JD Sports Fashion (JD.) 143.75p -0.82%

FTSE 250 - Risers

Hammerson (HMSO) 25.06p 3.73% Breedon Group (BREE) 337.00p 3.22% AJ Bell (AJB) 263.80p 2.81% IP Group (IPO) 51.30p 2.70% British Land Company (BLND) 313.80p 2.45% Telecom Plus (TEP) 1,480.00p 2.21% Intermediate Capital Group (ICP) 1,327.00p 2.12% Grainger (GRI) 232.80p 2.11% Softcat (SCT) 1,428.00p 2.00% Helios Towers (HTWS) 74.30p 1.92%

FTSE 250 - Fallers

Spirent Communications (SPT) 91.90p -29.90% Vistry Group (VTY) 790.00p -4.99% Aston Martin Lagonda Global Holdings (AML) 259.80p -4.56% Bridgepoint Group (Reg S) (BPT) 176.90p -4.43% Diversified Energy Company (DEC) 69.25p -3.55% Auction Technology Group (ATG) 591.00p -2.80% Mitchells & Butlers (MAB) 204.60p -2.57% 888 Holdings (DI) (888) 93.35p -2.35% Mitie Group (MTO) 95.60p -2.05% Coats Group (COA) 67.60p -2.03%