LONDON, May 12, 2026, 09:54 BST
London’s FTSE 100 slipped on Tuesday, dropping 0.48% to 10,219.95 as traders backed away from UK assets following a jump in gilt yields and fresh questions about Prime Minister Keir Starmer’s future. The index touched a session low of 10,152.05, with volume at 117.9 million shares, according to delayed figures from LSEG. Over the past year, the FTSE 100 has ranged between 8,531.06 and 10,934.94.
Why it’s significant: the selloff didn’t just hit one corner of the market. Yields on long-dated UK government bonds shot up to highs not seen in nearly 30 years, sterling slid, and banks paced the losses among stocks. After taking a drubbing in local elections, with almost 80 Labour MPs demanding he name an exit date, Starmer planned to huddle with his cabinet.
Yields on UK government bonds climbed, with the 10-year gilt adding 11 basis points to 5.11%. The 20-year yield hit 5.12%, and the 30-year moved higher to 5.80%, according to Reuters. Sterling slipped 0.7% to $1.351, and lost 0.4% versus the euro, trading at 86.92 pence.
Pressure on the political front mounted when Miatta Fahnbulleh, a junior minister from the housing and communities department, stepped down, calling for Starmer to lay out a timeline for a smooth transition. Reuters noted four ministerial aides had already left. Bond markets, meanwhile, have shown nerves around any hint that Starmer and Chancellor Rachel Reeves might give way to officials viewed as more open to borrowing and higher spending.
The FTSE 250 slipped 1.1% to 22,566.28 at the open, underperforming the FTSE 100 as its UK-focused stocks took a bigger hit. The AIM All-Share dropped 0.6%. Over in Europe, the STOXX 600 retreated 1.1%, with oil prices rising as optimism around a potential U.S.-Iran peace deal faded, keeping markets on edge over energy-fueled inflation risk.
Banks took some of the heaviest hits—Barclays shed roughly 4%, while NatWest and Lloyds both dipped over 3%. JPMorgan analysts, cited by Reuters, now see Britain’s banking surcharge climbing to 5% from 3% as the odds of a policy shift to the left increase.
“It’s not just Starmer possibly stepping down that’s got the bond market moving,” said Kathleen Brooks, research director at XTB, in comments to Reuters. “Traders are also weighing who might step in next, and the risk of an extended leadership fight that brings fresh fiscal pledges the UK’s finances can’t handle.” Reuters
Shares in Intertek diverged from the broader market after Sweden’s EQT private equity group tabled what it described as its final bid for the testing and inspection firm. The cash part of the offer comes to £60 per share, plus a potential final dividend topping out at 107.7p, putting Intertek’s value at £9.4 billion when the dividend is included. Intertek said it’s examining the approach and stressed there’s no guarantee a formal offer will follow.
Vodafone drew attention following its full-year report. Revenue rose 8.0% to €40.5 billion, with service revenue climbing 8.8% to €33.5 billion. Adjusted EBITDA after leases was up 3.8% at €11.4 billion. Still, the stock slipped in early London trade.
Equities faced more headwinds as rate expectations climbed. UK rate futures now imply roughly 68 basis points of Bank of England hikes by December—up from 56 basis points just on Monday. The Bank Rate sits at 3.75%, with the next policy decision set for June 18.
UK stocks face pressure as political uncertainty collides with steeper oil prices and mounting borrowing costs. If long gilt yields push higher, domestically focused firms could feel the squeeze from tighter financial conditions. A fresh spike in energy prices wouldn’t help, adding another layer of difficulty for the Bank of England’s already tricky inflation outlook.
Eyes are now on the U.S. consumer price release set for 13:30 BST, as markets look for signs that energy spikes are making their way into inflation. Next up: EQT faces a May 14 deadline to either put in a definite Intertek bid or step back. Looking further ahead, the Bank of England’s policy call comes June 18, the next big scheduled event for UK rates.
