Daily market update: gilts, Andy Burnham, Centrica, BP, Shell

The FTSE 100 fell as emerging evidence of inflationary pressures and domestic political uncertainty combined to put investors on edge.

The decision of a Labour MP to stand down and pave the way for Andy Burnham to return to parliament – likely as a precursor to a leadership challenge – has seen gilt yields move yet higher.

While there’s no guarantee Burnham would win a by-election or contest to be prime minister, the fact he is on record as saying Britain must stop being ‘in hock to bond markets’ has helped push UK borrowing costs higher and seen the pound slump.

A process involving Burnham also promises to be more protracted and ‘noisy’, thereby prolonging and exacerbating the uncertainty about the political situation in the UK.

Among the risers on the UK market were BP and Shell, as oil prices ticked higher on continuing disruption to supplies and reports China might be interested in buying US crude, while investment trust 3i Group recovered some of the heavy losses it endured yesterday on bad news regarding investee company Action.

Miners and domestic-facing names in the banking, retail, property and housebuilding sectors were among those to chalk up losses.

While the summit between Donald Trump and Xi Jinping seems to have gone smoothly this week, Asian and European markets outside of the UK were also under pressure.

The situation in the Middle East may have gone relatively quiet but every day that goes by without a resolution to the crisis only cranks up the pressure on the global economy. This is reflected in rising yields on government debt across the globe – not just the UK.

Centrica / British Gas

Centrica-owned British Gas has been reprimanded by energy regulator Ofgem for its behaviour involving the forced fitting of pre-payment meters and failing to protect vulnerable customers. It will now pay £20 million into a compensation fund and write off up to £70 million worth of vulnerable customers’ energy debt.

This is a major embarrassment for one of the country’s biggest energy suppliers and for parent company Centrica. Chief executive Chris O’Shea says processes have already changed, but the scale of the redress and public shaming means Centrica’s reputation is on the line.

This is not a situation where a big company pays a fine and moves on. It’s a scandal that points to unacceptable behaviour, with the CEO even saying, ‘What happened should never have happened’. Centrica has a duty to treat customers fairly and it has fallen short.