FTSE 100 closes lower as bond markets hit

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FTSE 100 Index

Last Updated at 23 Feb 2018, 16:36 GMT *Chart shows local time FTSE 100 intraday chart
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Trader in London Image copyright Getty Images

(Close): Shares fell sharply on the London market as a big sell-off in bonds rattled investors.

At close, the benchmark FTSE 100 was down 46.79 points, or 0.67%, at 6,886.95.

Elsewhere in Europe, France's Cac 40 index closed down 0.29% while Germany's Dax closed up 0.51%.

The yield on German 10-year bonds settled, after jumping by 20 basis points on Thursday, reaching 0.799%.

Only three weeks ago, the yield had fallen to a record low of just 0.05%.

Other eurozone bonds were affected, with French yields rising 14 basis points to 1%.

The global bond market has seen a huge sell-off in the past week, which has pushed down bond prices and increased yields.

Signs that fears about deflation may have been overdone is one reason behind the sell-off, analysts say. The argument is that if inflation is set to pick up, then investors are less likely to accept ultra-low returns on their bond investments.

Among individual UK shares, Morrisons shares closed 6.5% lower, after the company said first quarter sales fell 2.9%, worse than the 2.6% decline seen in the previous quarter.

The UK's fourth-largest supermarket group also warned that it would take a charge of up to £40m to cover restructuring costs.

BT Group's shares closed down 0.2%, despite its full-year results which came in ahead of forecasts.

The telecoms group reported a 14% rise in pre-tax profits to £2.645bn and said it added a record 455,000 new fibre broadband customers in the first three months of the year.

In the FTSE 250, shares in Telecity closed up 21% after it said could be taken over by US firm Equinix.

On the currency markets, the pound fell 0.1% against the dollar to $1.5225, and was up 0.5% against the euro at €1.3503.