Shares on the London market slipped back on Thursday as government borrowing costs held near multi-year highs, with trading remaining unsettled throughout the session. Russ Mould, investment director at AJ Bell, attributed the upward pressure on yields to a confluence of factors including regional geopolitical strains, unresolved questions over the health of UK public finances, and inflation that had yet to ease convincingly.

Trading in London concluded with the FTSE 100 shedding 177.73 points — a fall of 1.7% — to settle at a closing figure of 10,428.27. Losses of 396.78 points left the FTSE 250 at 24,143.21 — a drop of 1.6% — while the AIM All-Share gave back 5.36 points, settling at 782.04 after a 0.7% retreat.

Thursday's session left both Paris and Frankfurt indices in negative territory, with the CAC 40 shedding 1.6% and Frankfurt's DAX 40 giving back 1.0% by the close. At the moment London markets closed, the Dow Jones Industrial Average had slipped by half a percentage point in trading across New York. Both the S&P 500 and the Nasdaq Composite edged into negative territory, posting fractional retreats of 0.2% and 0.1% respectively.

Equity markets posted steep losses during the session, which also saw bond yields climb to levels not recorded in several decades. Trading in US government bonds stretched into an eighth consecutive session of losses. Trading on Thursday put the US 10-year Treasury note's yield at 5.30%, up two basis points from the 5.28% level recorded at the corresponding time the previous day. Trading at 5.63%, the long-dated 30-year Treasury rate edged a single basis point above its previous level.

On Thursday, the 10-year US Treasury note touched an intraday peak of 5.34% — a rate not recorded since April 2002 — while the 30-year bond climbed to 5.66%, putting both instruments at multi-decade highs not seen in roughly 24 years.

UBS attributed the bond market sell-off — where falling prices push yields higher — to a mix of cyclical and structural forces, noting that ongoing conflict in the Middle East showed little indication of a near-term resolution while Brent crude held at around $100 a barrel. The bank also pointed to strong US economic activity and a wave of debt issuance by large technology companies financing artificial intelligence expansion as factors placing upward pressure on yields, all set against a backdrop of persistent fiscal deficits. In the UK, the 10-year gilt yield edged down to 5.40% from 5.43% the previous session, having earlier climbed past 5.50%.

Thirty-year gilt yields briefly crossed the 6.0% threshold — a level not seen since 1998 — before pulling back to 5.97% as London equity trading wrapped up for the day.

Mould drew attention to the fact that the 10-year gilt yield had moved above the FTSE 100's projected 2026 dividend yield of 3.3%, adding that investors uneasy about the economic trajectory who do not anticipate an upward inflation breakout may find fixed income increasingly attractive relative to equities — particularly those seeking a degree of capital protection, given that gilts return their full face value at maturity.

In a statement to the Bank of England's monetary policy committee, rate-setter Catherine Mann put forward the view that further interest rate increases are needed to keep inflationary pressures in check and preserve the institution's standing. Speaking at an event, Mann — a Monetary Policy Committee member who leans towards tighter policy — argued that the Bank of England would need to lift borrowing costs directly at some stage, rather than depending on market movements alone to do the work of restraining credit, adding that, in her assessment, prevailing financial conditions had not been tightened sufficiently.

Delivering on Bank Rate increases, she argued, was the only way to preserve the central bank's credibility and prevent market expectations from drifting toward looser policy while inflation expectations moved in the opposite direction. She added that a transparent reaction function and a sufficiently tight rate path, rather than reliance on risk premia, were the tools needed to bring inflation risk and policy uncertainty under control.

Latest data on the UK's manufacturing sector pointed to an upturn in output over the previous month, though pressure along supply chains had yet to ease. Sitting at 51.9 in September, the S&P Global purchasing managers' index nudged ahead of August's 51.7 reading, keeping the gauge on the expansion side of the 50-point threshold that divides growth from contraction. Readings came in just under the 52.0 flash figure, though the index has held above the expansion threshold for eleven consecutive months.

Four FTSE 100 banking stocks retreated on the day, with bond-market turbulence pulling NatWest back by 5.4 per cent, Lloyds by 4.5 per cent, and both HSBC and Barclays each shedding 4.1 per cent. With the 28 October budget drawing near, lenders are keeping a close eye on whether the banking surcharge will face an upward adjustment.

Reports emerged on Thursday that Chancellor John Healey had called the heads of several major lenders — among them Barclays, HSBC, Lloyds Banking Group, and NatWest Group — to attend a meeting scheduled for the following Tuesday. According to the report, Healey had not previously convened a face-to-face gathering with the heads of UK banks since taking on the Chancellor role, with the session falling just ahead of his budget announcement due later this month.

Housebuilders, whose valuations track borrowing costs closely, also retreated during the session. Shares in Barratt Redrow, Bellway, Persimmon, and Taylor Wimpey retreated by between 4.4 and 5.5 percentage points, with Bellway and Taylor Wimpey recording the steeper end of those losses at 5.3% and 5.5% respectively.

Nationwide, the mortgage lender, recorded a 0.8% annual gain in house prices for September, down from the 1.6% increase posted the previous month. Growth came in at its most subdued pace since December 2025.

RBC Capital Markets equity analyst Anthony Codling described the figures as falling short of a catastrophe yet serving as a reminder that market conditions remain tied to external forces outside its influence, pointing to geopolitical tensions across the Middle East as a factor pushing energy costs upward and keeping both inflation concerns and mortgage rates elevated.

Among smaller-capitalisation stocks, Light Science Technologies shed 18% of its value after the company advised that full-year results would fall short of prior guidance, attributing the shortfall to delayed approvals within its Passive Fire Protection division. Revised guidance puts full-year turnover for the Derbyshire agricultural lighting and monitoring firm within a £9.0 million to £9.5 million band, a range that would place annual receipts above the £8.6 million recorded in the preceding financial year. A revenue projection of £11.5 million had been put forward by Shore Capital analyst Andrew Saunders.

RentGuarantor's stock jumped 18% after the firm told investors it expected both revenue and EBITDA to land meaningfully above the figures analysts had been working with. Analyst forecasts placed revenue somewhere in the £14 million to £15.1 million range, with EBITDA projections running from £4.1 million up to £4.9 million.

Priced at 101.71 dollars per barrel on the London market, Brent crude had slipped roughly two dollars from the 103.82 dollars recorded the previous evening by the time equities wrapped up trading on Thursday. Spot pricing placed gold at $4,163.35 per troy ounce, a modest advance from the prior reading of $4,158.28.

Among the FTSE 100's strongest performers of the session, Computacenter added 65.0p to reach 5,470.0p, while BP climbed 7.7p to 557.1p, Autotrader Group gained 7.6p to close at 460.4p, Tesco advanced 6.0p to 474.8p, and Airtel Africa moved 4.0p higher to 304.6p.

Leading the FTSE 100's list of decliners, Games Workshop Group shed 1,120.0p to trade at 16,870.0p, while Lion Finance Group dropped 830.0p to 13,540.0p. Elsewhere among the day's notable losers, Weir fell 128.0p to 2,574.0p, NatWest Group eased 37.0p to 651.4p, and Lloyds Banking Group slipped 4.8p to close at 102.1p.

JD Wetherspoon, the pub chain, is due to release its annual financial results on Friday. Two data releases are scheduled to set the tone for markets on Friday — eurozone inflation readings and the American employment report, which covers nonfarm payroll figures.