By Barbara Kollmeyer
A global equity selloff spread to London’s stock markets on Friday, as heavily weighted commodity stocks dragged the index lower, with airlines among the lone bright spots after gains for International Consolidated Airlines Group.
The FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX -2.06% fell 0.9% to 6,587 for a weekly loss of 0.7%. The pound /zigman2/quotes/210561263/realtime/sampled GBPUSD +0.0921% fell 0.8% to $1.3909, as investors sought shelter in the dollar as a brutal stock selloff on Wall Street — sparked by climbing bond yields — spread across the globe.
“The aftereffects of the sharp spike in bond yields in the last 24 hours, continue to be felt as we head toward the end of the week and the month, as investors adopt a risk-off approach, with the U.S. dollar rising across the board, with the exception of the Japanese yen, which is also acting as a haven,” said Michael Hewson, chief market analyst at CMC Markets U.K.
The yield on the 10-year gilt /zigman2/quotes/211347177/realtime BX:TMBMKGB-10Y +5.13% was up 3 basis points to 0.817%, hovering at levels not seen in almost a year. Global yields have been tracking those of the 10-year U.S. Treasury note /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +0.84% , which reached above 1.5% on Thursday.
In tandem with stock losses, commodity prices also fell, with copper /zigman2/quotes/210056589/delayed HGK21 +1.69% , platinum , and palladium /zigman2/quotes/217647915/delayed PAM21 +0.33% futures prices all down by 3% or more. Silver /zigman2/quotes/213039318/delayed SIK21 +0.22% prices saw similar losses.
Those price drops hit the heavily weighted mining sector in London, with shares of Anglo American /zigman2/quotes/201381512/delayed UK:AAL -1.60% falling 5%, and those of BHP Group /zigman2/quotes/203323256/delayed UK:BHP -1.68% /zigman2/quotes/203323256/delayed UK:BHP -1.68% and Rio Tinto /zigman2/quotes/208934945/delayed UK:RIO -1.88% /zigman2/quotes/202627887/composite RIO +0.69% down 3% each. Shares of Glencore /zigman2/quotes/201400686/delayed UK:GLEN -1.09% fell 4%.
Major oil companies also weighed on the index, with shares of BP /zigman2/quotes/202286639/delayed UK:BP -1.84% /zigman2/quotes/207305210/composite BP -0.41% and Royal Dutch Shell /zigman2/quotes/205095589/composite RDS.A -2.10% /zigman2/quotes/206428183/delayed UK:RDSA -2.35% dropping 3% and 2%, respectively, as crude prices /zigman2/quotes/209723049/delayed CL00 -0.52% also came under pressure.
Nestled in a handful of gainers was the airline sector, which has gained this week amid hopes for the return to travel and signs of pent-up demand. EasyJet /zigman2/quotes/202825892/delayed UK:EZJ -3.46% and others reported a rush in bookings earlier in the week , after Prime Minister Boris Johnson laid out a plan for England to exit its strict lockdown.
Shares of International Consolidated Airlines Group /zigman2/quotes/208070069/delayed UK:IAG -5.16% rose 4%. The operator of British Airways, Iberia and other airlines swung to a record loss , and said it won’t provide 2021 guidance due to COVID-19 pandemic uncertainty.
Like many airlines, IAG’s year has been dominated by trying to ensure it has access to enough cash and debt to keep the business going through dark times, which it has successfully done.
“One could argue that the worst times could soon be over, particularly as people are starting to think about booking holidays again. IAG is naturally reluctant to issue any earnings guidance for the new financial year, but one can’t help feeling there are grounds to be optimistic about it having significantly more planes in the sky in six to nine months’ time,” said AJ Bell investment director Russ Mould.