London midday: Stocks gain, 30-year gilt yields hit fresh 27-year high

(Sharecast News) - London stocks had pushed higher by midday on Wednesday after a flat start, while 30-year gilt yields hit a fresh 27-year high amid a global selloff. The FTSE 100 was up 0.6% at 9,167.99.

Russ Mould, investment director at AJ Bell, said: "The 30-year gilt yield continued its ascent, briefly touching 5.756% before pulling back a touch. Bond investors are worried about the state of public finances and uncertainty over how the government will fill the black hole. Chancellor Rachel Reeves is under pressure to produce new solutions at the forthcoming Budget, and we could see further volatility on the bond market ahead of this event.

"The rise in the gilt yield sends a clear message - that investors believe the UK is now a riskier proposition and they want a higher return for lending money to the government."

The Treasury announced earlier that Reeves will deliver the budget on 26 November.

It wasn't just UK bond yields jumping to new highs, with the US 30-year Treasury yield breaching a key threshold of 5%, and French, German and Japanese bond yields also sharply higher.

On a more positive note, a survey out earlier showed that activity in the UK's services sector accelerated more than expected in August, with growth hitting a 16-month high.

The S&P Global services purchasing managers' index for August was revised up to 54.2, from the flash estimate of 53.6 which had already smashed market forecasts of 51.8 when it was released two weeks ago.

That was up from 51.8 in July and the highest rate of growth - defined by any figure above 50.0 - since April 2024.

Growth was driven by a rebound in new order intakes following a moderate decline in July, with growth hitting an 11-month high, helped by rising sales in both domestic and overseas markets.

Meanwhile, business optimism reached a 10-month high on the back of hopes of a turnaround in customer demand, while concerns eased about the impact of US tariffs.

However, hiring trends remained "subdued" with workforce numbers having now decreased for the 10th straight month as higher payrolls costs hold back recruitment.

"August data highlights a welcome acceleration of output growth and a swift rebound in order books after July's dip, leaving the UK service economy on a much stronger footing as the end of summer comes into view," said Tim Moore, economics director at S&P Global Market Intelligence.

"Improved sales pipelines, lower borrowing costs and receding fears about US tariffs all helped to boost business optimism. However, many service providers still commented on elevated government policy uncertainty and worries about forthcoming tax-raising measures expected in the autumn Budget," Moore added.

Wednesday's upgrade to the services PMI meant the composite PMI - which tracks both services and manufacturing activity together - picked up to 53.5 in August from 51.5 in July. That was up from the flash estimate of 53 and marked the strongest growth across the private sector since April 2024.

In equity markets, precious metals miner Fresnillo and gold miners Hochschild and Endeavour all shone as gold prices hit a new record high.

Equipment rental firm Ashtead advanced as it reiterated its full-year outlook despite a dip in first-quarter earnings.

Watches of Switzerland surged after saying it does not expect any material impact from US tariffs in the first half of fiscal 2026 as brand partners increased inventories. The company held guidance despite US President Donald Trump slapping Switzerland with a shock 39% tariff on exports. WoS said trading had been consistently strong in the 18 weeks to 31 August.

Babcock rallied following a report the UK is in advanced talks to build warships for Denmark and Sweden. According to the Financial Times, discussions are centred on Babcock producing Type-31 frigates at Rosyth in Scotland for Denmark and Sweden.

On the downside, M&G lost ground even as it reported steady profits for the first half, as the investment manager saw strong net flows from open business.

Food manufacturer Hilton Food tumbled after releasing first-half results analysts described as "mixed". Hilton said it delivered a "robust" performance and further strategic progress in the six months ended 29 June, despite "challenging" market conditions.

The company posted a 7.6% increase in interim revenue to £2.09bn, while pre-tax profits ticked up 0.3% to £33.6m.