FTSE 100 LIVE: Stocks fall and pound tumbles as UK 30-year bond yields hit 27-year high

Gold prices (GC=F) surged to an all-time high on Tuesday, eclipsing the previous record set in April following the US administration’s “liberation day” tariffs under US president Donald Trump. Tuesday’s rally was fuelled by a combination of a weaker US dollar and growing expectations that the Federal Reserve will reduce interest rates later this month.

At the time of writing, gold futures rose 1.1% to $3,554.90 per ounce, while the spot price of gold rose 0.9% to $3,508.70 a troy ounce during early trading in Asia, before paring gains to trade at $3,483.00.

Market sentiment remains heavily influenced by speculation of a Federal Reserve rate cut in September. According to the CME FedWatch tool, there is currently a 90% probability of a 25-basis-point cut. The softer US dollar has also made gold more attractive to foreign investors, further fuelling the metal’s price climb.

Investor sentiment has been further shaken by growing concerns over the Federal Reserve’s independence. Trump has repeatedly criticised Fed chairman Jerome Powell, and recently threatened to dismiss governor Lisa Cook, leading some to question the central bank’s autonomy. The ongoing pressure has raised concerns about the future direction of US monetary policy.

This uncertainty has driven an increased demand for gold-focused exchange-traded funds (ETFs), which, in turn, has supported the broader rally in the precious metal. Additionally, some central banks have been quietly adding to their gold reserves, signalling growing global interest in the asset as a hedge against economic uncertainty.

Worries about inflation have also lifted demand for gold, as Tony Sycamore, IG analyst, said:

As long-term UK borrowing costs surged to their highest level in almost three decades, experts are warning “the bond market is flashing red”.

The 30-year gilt yield in the UK has risen to around 5.67% – that’s the highest since 1998 and has sparked renewed concerns about the UK’s fiscal position.

The spike mirrors moves in other countries, with German long-dated bond yields also hitting multi-year highs, but experts say the UK’s fiscal outlook and debt profile make it more vulnerable than peers.

Financial experts warned the jump in gilt yields is a warning shot to the government to present credible fiscal plans in the budget.

David Belle, founder and trader at Fink Money, said the UK is in a worse place than other countries.

UK’s long-term cost of borrowing hit its highest level since 1998. The 30-year gilt yield, or interest rate, has risen to 5.680% in early trading, over the previous 27-year high set on 9 April.

It comes as a blow to chancellor Rachel Reeves, who will be drawing up this autumn’s budget, as higher yields mean the government must pay more to borrow.

This risks creating a vicious circle where rising debt costs undermine confidence further, pushing yields up again.

Jim Reid of Deutsche Bank said:

Germany’s 30-year yield also climbed to a 14-year high, tracking a rise in US Treasury yields.

Stocks in Asia were mixed overnight with the Nikkei (^N225) rising 0.3% on the day in Japan, while the Hang Seng (^HSI) fell 0.5% in Hong Kong.

Japanese yields have partly bucked the international trend this morning with the strongest 10-year auction since October 2023 helping yields dip -1.4bps.

However, 30-year yields have followed their international peers and are up 1.7bps in Asia trading, hovering around their highest ever yield since they were first issued in 1999. This is ahead of a 30-year auction on Thursday.

The Shanghai Composite (000001.SS) was 0.5% down by the end of the session and in South Korea, the Kospi (^KS11) added 0.9% on the day, recovering from losses in their previous sessions.

Data released this morning indicated that South Korea’s headline inflation decreased for the second month in a row, reaching a nine-month low of 1.7% year-on-year in August (compared to an expected 1.9% and 2.1% in July).

This decline has been primarily attributed to a 50% reduction in bills from SK Telecom (017670.KS, SKM), the country’s largest mobile service provider, thus helping to keep inflation below the central bank’s 2% target and opening the door for additional rate cuts to bolster the economy.

Across the pond on Wall Street, markets were closed ahead of the final stretch of the year. The US will return today from yesterday’s Labor Day holiday.

Good morning, and welcome back to our markets live blog. As usual we will be taking a deep dive into what’s moving markets and happening across the global economy.

Looking ahead, today’s US data includes the ISM manufacturing report for August, while the Euro Area will release its flash CPI for the same month. Central bank speakers include the ECB’s Müller.

Here’s a snapshot of what’s on the agenda:

• 7am: Trading updates: Oxford Nanopore Technologies

• 10am: Eurozone flash inflation reading for August

• 3pm: US manufacturing PMI report