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Market Report: FTSE 100 has its worst week in seven months as US rate fears rise

The FTSE 100 endured its worst week since March after plunging a further 99.80 points to 7,318.54 yesterday as the index neared a six-month low - REUTERS
The FTSE 100 endured its worst week since March after plunging a further 99.80 points to 7,318.54 yesterday as the index neared a six-month low - REUTERS

The FTSE 100 suffered its worst week in seven months after the bond market wobble spilt over into a second day as another stellar US jobs report fuelled fears of rising interest rates.

Unemployment in the States unexpectedly dropped to 3.7pc in September, its lowest level in 49 years, as revised figures showed another 404,000 jobs being added to the buoyant US economy in the last two months.

The American jobs juggernaut showing no signs of slowing extended the surge in the US 10-year Treasury yield as investors braced for rate rises at the Federal Reserve to push well into 2019.

The closely-watched benchmark rate spiked to a fresh seven-year high on the expectation of the Fed being forced to rein in an overheating US economy by tightening policy.

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Money markets indicated that investors are starting to price in another four increases in US borrowing costs in the next year.

The recent strength in the economy and surge in interest rates will worsen an eventual slowdown as “the boost from fiscal stimulus fades” next year, Andrew Hunter at Capital Economics, warned.

A third day of climbing bond yields sent ripples across markets as stocks suffered a second day of sharp losses.

The FTSE 100 endured its worst week since March after plunging a further 99.80 points to 7,318.54 yesterday as the index neared a six-month low.

The Euro Stoxx 50, a measure of the top stocks in the eurozone, slumped 0.9pc while a tech stocks sell-off hit Wall Street, knocking the S&P 500 as much as 0.9pc in early trade in New York.

Elsewhere, shopping centre owner Hammerson rebounded from a six-year low after a swoop for rival Intu Properties reignited takeover buzz in the sector and Credit Suisse delivered it a double upgrade.

Its analysts told clients that the challenging consumer backdrop in the UK could ease once a Brexit deal is reached.

Credit Suisse also highlighted that Klépierre’s six month lock-up period is due to expire in the coming weeks.

The French firm walked away from a deal for Hammerson after its improved offer for the Birmingham Bull Ring owner was rejected.

The upgrade from “underperform” to “outperform” lifted Hammerson 12.1p to 440.4p while Intu soared 40.5p to 189p, a 27pc surge.

Gold miner Centamin plunged to the bottom of the FTSE 250 after cutting its production guidance for the second time this year.

The surprise downgrade was “disappointing on a number of levels” and “poor messaging” has not helped the Egyptian miner, RBC Capital Markets analyst James Bell argued in a downgrade. Centamin closed 17.4p lower at 91.3p, wiping out its recent share price rally.

Royal Mail took another tumble at the end of its torrid week after Citigroup warned that there is a risk of an acceleration in the letter mail decline amid uncertainty over the impact of GDPR.

It fell a further 9.3p to 345p, bringing its weekly drop to 28pc.

Base metal miners slipped as copper declined for a second straight week. Antofagasta led the FTSE 100 lower after Goldman Sachs warned that it could miss its production guidance, weakening the copper specialist 47.6p to 827p, while heavyweights Anglo American and Rio Tinto sunk 74p to £16.69 and 157p to £37.45, respectively.