The FTSE 100 recorded its most significant single-day fall since May, dropping two per cent in early trading on 1 October 2026. This decline eliminated all gains the index had made during the third quarter.
The sell-off in London's blue-chip index occurred as European markets were impacted by a widespread rout in bond markets, which has driven western government borrowing costs to multi-decade highs. Similar losses were observed across other European stock markets, including France's Cac, Amsterdam's AEX, and Frankfurt's Dax, which were all down significantly at market open.
Analysts attributed the market movements to rising energy prices and increased pressure on government bonds. Neil Wilson, a Saxo investment strategist, noted that the "relentless rout in the bond market is sending investors running for cover."
Banks, including Standard Chartered, HSBC, and Natwest, led the FTSE 100 losses, all falling by more than three per cent through Thursday morning. Housebuilders and construction companies, such as Weir and Barratt Redrow, were also among the biggest losers on the index.
The market volatility is occurring amidst ongoing concerns over global bond markets, with sticky inflation, partly due to the conflict in Iran, and western governments' budget deficits cited as factors. Mohit Kumar, chief European Economist at Jefferies, expressed concern over deficits, anticipating they would remain an issue into 2027.
The yield on the UK's 30-year gilt has surpassed six per cent for the first time this century. The US's 10-year Treasury yield and the Japanese 10-year bond yield have both risen by over 110 basis points this year.