FTSE 250 slump deepens as gilt yields rise

Rising UK bond yields have pressured FTSE mid-cap stocks today, while in the US signs of strength in the labour market mean rate cut bets continue to be pushed further back into the second half of 2025, says Chris Beauchamp, Chief Market Analyst at online trading platform IG.

FTSE 250 slumps to a five-month low

The mood music around the UK continues to deteriorate as 30-year gilt yields rise to their highest level over a quarter of a century. Investors have come back from the festive break in a sour mood concerning the UK, and have now decided that the UK’s cheap status is not an attraction, but instead a reflection of the poor situation facing the British economy. The cautious attitude is evident across markets, but it seems to be the UK that is bearing the brunt.

Wall Street struggles as rate cut bets are pushed back

Yesterday’s signs of rising inflation in the US have combined with an eleven month low in jobless claims to push back expectations of any rate cuts in 2025. While the claims figure shows that the US economy’s much-vaunted economic strength is still in place, rising prices mean the Fed’s job is going to get much tougher. This is, of course, before any new tariffs are imposed. Having effectively achieved his soft landing in 2024, Powell is going to find keeping the economy in that sweet spot will be much harder.