The FTSE 100 extended its rebound to a third consecutive session on Tuesday, as easing pressure in global bond markets and strength in healthcare stocks helped London's blue-chip index recover further from last week's sharp selloff.
The index advanced approximately 0.6% in early trading, building on gains of 0.34% on Monday and 0.32% on Friday. AstraZeneca provided a significant boost, rising around 2%, while the broader pan-European STOXX 600 also moved higher.
This recovery follows a turbulent week in which the FTSE 100 fell 2.2%, its steepest weekly decline since April, as UK gilt yields surged and investors reassessed the relative appeal of equities versus government bonds.
Bond market pressure eases but remains elevated
The immediate relief stems from the bond market. Euro-zone yields eased on Tuesday after a sharp rise driven by fiscal concerns in France and political uncertainty in Spain, moderating the extreme pressure seen across European sovereign debt last week.
However, the underlying issue persists. The UK 10-year gilt yield had climbed above 5.4%, its highest level since 2007, while the 30-year yield briefly exceeded 6% for the first time since 1998.
Russ Mould, investment director at AJ Bell, noted that rising gilt yields have become a direct competitor to FTSE 100 income. He pointed out that the 10-year gilt yield was more than two percentage points above the index's expected 2026 dividend yield, although the FTSE's earnings yield of about 7.4% still left equities with a valuation case.
AstraZeneca lifts the index
AstraZeneca's roughly 2% gain provided the strongest single-stock support on Tuesday. The pharmaceutical group holds a large weight in the FTSE 100, meaning its movements can materially influence the index.
Healthcare strength also buoyed European markets. The STOXX 600 gained about 0.8%, with the sector up roughly 1.6% as Denmark's Genmab surged after positive late-stage blood-cancer trial results. Germany's DAX, France's CAC 40, Italy's FTSE MIB, and Spain's IBEX 35 also opened higher.
This matters for London because the FTSE 100 is relatively defensive and internationally exposed. A calmer bond market and softer oil prices can support large healthcare, consumer, and industrial names even when the domestic economy remains uneven.
Inflation risks limit the upside
The primary reason not to declare the bond shock over is inflation. S&P Global's UK services PMI came in at 52.1 for September, above the flash estimate of 51.7 but down from 52.5 in August.
More importantly, firms reported the sharpest increase in selling prices since May as fuel and wage costs rose. Tim Moore, economics director at S&P Global Market Intelligence, said higher fuel costs had reversed some of the easing in service-sector inflation seen earlier this year. RSM UK chief economist Thomas Pugh added that the renewed price pressure strengthens the case for further Bank of England tightening later this year.
The FTSE 100 has now risen for three sessions, and the worst of the forced bond-market selling may be passing. But with gilt yields still historically high, mortgage costs elevated, and UK inflation pressures reappearing, the rebound is not yet proof that the risk has cleared.
This article is for informational purposes only and does not constitute financial advice.
