UK and European equities are trading with a softer tone as investors contend with renewed inflation concerns from elevated energy prices and a broad rise in government bond yields. The FTSE has shown relative resilience compared with continental peers, helped by its defensive and energy exposure, although banks and other interest rate sensitive sectors have come under pressure. Across Europe, sentiment remains cautious ahead of key central-bank decisions, with higher borrowing costs and geopolitical risks encouraging investors to favour healthcare and other defensive areas.

US markets opened cautiously after an unsettled futures session, with investors focused on the sharp rise in Treasury yields and the Federal Reserve’s policy meeting. The prospect of tighter monetary policy, combined with elevated oil prices, has revived concerns that inflation could remain persistent and restrict the scope for future rate relief. Technology shares remain particularly sensitive following recent concerns surrounding the pace of artificial intelligence development, while the broader market is responding positively whenever bond yields and energy prices retreat from their intraday highs.

Asia-Pacific markets were broadly weaker as rising global yields, high oil prices and expectations of tighter US monetary policy weighed on risk appetite. Hong Kong and mainland Chinese equities declined, with softer retail indicators tempering optimism around improving industrial activity, while Japanese shares also struggled as technology and materials stocks remained under pressure. Bond markets were an additional source of unease, with Japanese yields reaching levels not seen for several decades.

Oil remains elevated as geopolitical tensions in the Middle East continue to threaten regional production and transport infrastructure. Disruption concerns surrounding Saudi energy infrastructure and shipping routes have kept a significant risk premium embedded in crude prices, although some of the earlier gains have eased during the session. The persistence of expensive energy is increasingly important for global monetary policy because it threatens to prolong inflation and keep central banks cautious about reducing borrowing costs.

Gold remains under pressure as a stronger US dollar and sharply higher government bond yields reduce the relative appeal of the non-interest-bearing metal. The recent decline has continued despite heightened geopolitical uncertainty, suggesting that investors are currently favouring the dollar rather than precious metals as their principal defensive asset. Expectations of tighter Federal Reserve policy are also contributing to the weaker tone.

Kier Group attracted attention after reporting stronger annual revenue and profit and announcing a strategic shift away from new residential development. The group intends to focus more heavily on infrastructure, including energy, defence, hospitals and water projects, supported by a substantially enlarged order book and improved financial position. Investors responded positively to the increased emphasis on higher-visibility infrastructure work and management’s confidence in the outlook.