Bond.az — British stocks opened lower on Wednesday, weighed down by a surge in global bond yields to multi-decade highs and persistent uncertainty surrounding the U.S.-Iran war, which overshadowed a softer-than-expected UK inflation print.
The blue-chip FTSE 100 fell 0.50%, while Germany’s DAX slipped 0.28% and France’s CAC 40 declined 0.10%. Sterling edged 0.05% lower to 1.3388 against the dollar as of 03:15 ET (07:15 GMT).
Global bond markets set the tone. The 30-year U.S. Treasury yield eased slightly to 5.17% on Wednesday but remained close to its highest level since 2007, having surged sharply over the past month, while the benchmark 10-year yield hovered around 4.66%, a 16-month high.
UK consumer price inflation offered a measure of relief. CPI eased to 2.8% year-on-year in April, the Office for National Statistics said Wednesday, undershooting economist expectations of 3% and slowing from 3.3% in March.
Core CPI slowed to 2.5% from 3.1%, while services inflation, closely watched by the Bank of England, fell sharply to 3.2% from 4.5%. Investors trimmed their bets on Bank of England rate hikes in response, with rate futures pricing around 52 basis points of tightening by December, down from roughly 60 basis points on Tuesday.
Analysts, however, cautioned that the benign headline figure masked building pipeline pressure. Producer price index inflation surged to 4% in April, well above the 2.8% expected and up from 3% in March, driven by a 7.7% jump in input costs as supply disruptions from the Middle East conflict fed through to factory gates.
“The drop in CPI inflation... feels like the lull before the storm,” Capital Economics said, forecasting inflation will climb to around 4% by early 2027.
Geopolitical tensions remained a live concern. U.S. President Donald Trump said Tuesday he had been "an hour away" from ordering new strikes on Iran before standing down at the request of Gulf allies, allowing Pakistan-brokered negotiations a window of two to three days to yield results.
Trump warned a "full, large scale assault" remained ready to launch "on a moment’s notice." Iran’s deputy foreign minister reiterated Tehran’s conditions for any deal, including sanctions relief, the release of frozen assets and an end to the U.S. naval blockade, while an Iranian lawmaker warned any renewed attack would be met with a "stronger response."
Bank of England Governor Andrew Bailey was due to appear before the Treasury Committee on Wednesday, where he was expected to address last month’s rate cut and the economic fallout from the Iran war.
M&S on Wednesday reported a 24% drop in annual profit, blaming a seven-week suspension of online clothing orders following last year’s cyberattack.
Chancellor Rachel Reeves unveiled reforms giving parliament authority to fast-track approval of critical energy and infrastructure projects, shielding them from judicial review delays.
