The FTSE 100 advanced 0.8% on Wednesday, supported by gains in energy stocks as crude oil prices recovered from two-month lows, while investors assessed higher global bond yields and awaited new UK economic data.
London’s benchmark index benefited from its exposure to oil and other commodity-related companies, even as government bond markets came under pressure following stronger-than-expected US inflation figures.
Investors were also preparing for the release of UK third-quarter gross domestic product (GDP) figures and September industrial production data on Thursday.
Oil Price Recovery Supports London Equities
Crude oil prices rebounded after reaching two-month lows on Tuesday, as traders assessed developments in the Middle East and their potential implications for global energy supplies.
Market attention remained focused on diplomatic efforts to reduce regional tensions alongside renewed concerns about shipping disruptions in the Strait of Hormuz.
Reports of further attacks on commercial vessels raised questions about the security of energy shipments through the waterway, an important route for international oil and gas transportation.
The recovery in crude prices supported shares in major energy producers, contributing to the FTSE 100’s advance.
The index’s relatively large weighting in energy and other commodity-related sectors helped distinguish its performance from markets with greater exposure to technology companies.
US Inflation Data Pushes Global Bond Yields Higher
Government bond markets faced selling pressure following Tuesday’s US Consumer Price Index report, which showed inflation exceeding market expectations.
The data prompted investors to reassess the outlook for US monetary policy, with market expectations increasingly reflecting the possibility of a 25-basis-point Federal Reserve interest rate increase in December.
Comments from regional Federal Reserve officials also contributed to discussions about the potential for a larger 50-basis-point adjustment, although this remained a less widely anticipated scenario.
Higher bond yields can affect equity valuations by increasing financing costs and the discount rates applied to future corporate earnings.
Technology companies, whose valuations are often more sensitive to changes in long-term interest rates, faced particular scrutiny as investors adjusted their expectations.
The FTSE 100’s sector composition provided some offset to these pressures, with gains in energy shares supporting the broader index.