U.K. stocks dropped for the first time in three days on Tuesday, tracking an equity selloff in the U.S. and Asia that came as investors got nervous about a rally in U.S. bond yields.
The FTSE 100 index dropped 1.1% to end at 7,587.98, its lowest close since Dec. 20, according to FactSet data. The pound rose to $1.4120 from $1.4075 late Monday in New
York. The pound rebounded after briefly falling below $1.40 earlier in the session on concerns about the Brexit negotiations. The losses in London came as part of a global selloff, in which the Dow Jones Industrial Average fell more than 300 points on Tuesday, as investors continued to fret about a rally in bond yields. Higher returns on debt securities typically make stocks and other assets perceived as risky less attractive to investors. The yield on 10-year U.S. Treasury notes rose to its highest level since April 2014 on Monday and continued higher on Tuesday to 2.71%. Brexit was back in the headlines on Tuesday, after a BuzzFeed report that a leaked document on the government’s analysis of the European Union divorce shows the U.K. will be significantly worse off outside the EU, regardless of what deal is struck.
At the time of the European market close, Bank of England Governor Mark Carney was being quizzed by the House of Lords Economic Affairs Committee, whose questioning included the BOE’s Brexit forecasts. Banks were among the biggest losers on Tuesday after the Financial Conduct Authority urged U.K. lenders to check up on customers with interest-only mortgages. The FCA said it is concerned that shortfalls in repayment plans could lead to people losing their homes. Shares of Standard Chartered PLC fell 2.9%, Barclays dropped 2.8% and Royal Bank of Scotland Group gave up 2.7%. Shares of Anglo American PLC fell 2.3% even as its majority-owned De Beers Group said diamond sales jumped in the first sales cycle of 2018. In Ireland, shares of Ryanair fell 2.2% after the discount airline and the British Airline Pilots’ Association said they have struck an agreement for the representation of cockpit crew. The deal is seen as a major breakthrough in Ryanair’s talks with laborgroups. UBM PLC rose 4.3% on news of a 3.9 billion-pound ($5.47 billion) takeover offer from Informa. Informa shares rose 0.9%.
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