British Stocks Suffer as Inflation and Gilt Yields Climb

British stocks faced a challenging day as increasing UK gilt yields and persistent inflation concerns led to a decline. The FTSE 250 index dropped significantly, while the FTSE 100 remained stable due to the currency drop benefiting international firms. Investors anticipate modest rate cuts by the Bank of England.

British stocks faced significant pressure on Wednesday, compounded by a dip in sterling and soaring UK gilt yields. Higher interest rates and persistent inflation contribute to investor concerns, showing a tough market landscape.

The FTSE 250 mid-cap index experienced a near 2% decline, hitting a five-month low. While the blue-chip FTSE 100 managed to stay stable, benefiting from a 1% drop in sterling as international firms on the index profited from overseas income.

Adding to market worries, UK gilt yields reached levels not seen since the late 1990s, due to concerns about the effect of higher borrowing costs on the fragile state of British government finances. Investors now expect limited rate cuts by the Bank of England, while inflation remains a concern.

(With inputs from agencies.)