UKX FTSE 100 Index

By Carla Mozee, MarketWatch

U.K. stocks dropped Wednesday, with the blue-chip market's run of wins at risk after elevated U.S. bond yields triggered a selloff on Wall Street.

How markets are performing

The FTSE 100 index fell 0.5% to 7,388.53, led by losses for commodity and industrial stocks, but health care and consumer goods shares were higher. The London benchmark on Tuesday rose 0.4% (http://www.marketwatch.com/story/ftse-100-looks-for-6th-win-as-oil-shares-rise-pound-falls-2018-04-24) to log its sixth consecutive gain, the longest winning streak since mid-May 2017, according to FactSet data. Tuesday's close also marked the index's first close above 7,400 since early February.

The pound bought $1.3939, down from $1.3978 late Tuesday in New York. In the fixed-income market, the yield on the 10-year gilt rose 2 basis points to 1.56%, according to Tradeweb.

Read:Here's the threat to the stock market from rising bond yields (http://www.marketwatch.com/story/heres-the-threat-to-the-stock-market-from-rising-bond-yields-2018-04-24)

What's driving the market

U.K., European and Asian stock markets took their cues from a slide in U.S. stocks on Tuesday (http://www.marketwatch.com/story/dow-shapes-up-to-break-losing-streak-but-earnings-could-kill-the-buzz-2018-04-24), which was led by declines in shares of industrial, basic materials and technology companies.

U.S. stocks swung lower after the U.S. 10-year Treasury yield climbed and touched the psychologically important 3% level for the first time in four years. Meanwhile, shares of industrial heavyweights dropped, with 3M Co. shares (MMM) plunging after the company trimmed its full-year outlook (http://www.marketwatch.com/story/3ms-stock-tumbles-into-a-bear-market-after-most-disappointing-results-in-over-a-decade-2018-04-24). The Dow Jones Industrial Average sank 424 points, or 1.7%, and the S&P 500 index gave up 1.3%.

U.S. bond yields have been rising on expectations that inflationary pressures could prompt the Federal Reserve to ramp up the pace of rate hikes, which would increase borrowing costs for companies and consumers. European bond yields have also been creeping higher. Higher yields can weigh on stocks as bonds start to offer better returns than equities and raise borrowing costs.

Read:What it means for the market that the U.S. 10-year government bond yield hit 3% (http://www.marketwatch.com/story/heres-what-it-means-for-the-market-that-the-us-10-year-yields-3-2018-04-24)

What are strategists saying?

"We are in the midst of earnings season, which continues to be strong, but the market appears to be fully priced and in this environment of sharply rising bond yields, the fear is driving risk appetite backwards," said Hantec Markets analyst Richard Perry in a note.

"Bond markets will now be eying the January 2014 high on the 10-year yield, which is a peak of 3.04%. The question is also whether these market moves begin to show a decisive safe-haven bias once more similar to the February fears," said Perry, noting those moves were driven by a sharp increase in U.S. wage-growth data.

Share movers

Antofagasta PLC (ANTO.LN) fell 3.6% after the miner said first-quarter copper production (http://www.marketwatch.com/story/antofagasta-copper-output-down-holds-to-guidance-2018-04-25) fell 10.5% due to lower grades, but that guidance for the year is unchanged.

Whitbread PLC shares (WTB.LN) turned lower, losing 1.1% after the company said it will spin off Costa Coffee (http://www.marketwatch.com/story/whitbread-to-spin-off-costa-coffee-business-2018-04-25-24854827) into a separate business. Whitbread said it will remain the owner and operator of its Premier Inn hotel business.

Lloyds Banking Group PLC shares (LLOY.LN) were down 0.4% after the lender posted a 23% rise in first-quarter pretax profit. (http://www.marketwatch.com/story/lloyds-pretax-profit-up-23-as-ppi-provision-falls-2018-04-25)

Shire PLC shares (SHPG) (SHPG) were down 0.9%, but had traded higher early Wednesday after the drug maker recommended shareholders accept (http://www.marketwatch.com/story/shire-seems-ready-to-accept-latest-takeda-offer-2018-04-24) an improved takeover bid from Takeda Pharmaceutical Co. (4502.TO).

(END) Dow Jones Newswires

April 25, 2018 04:47 ET (08:47 GMT)

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