London's FTSE 100 gave up its early gains and closed lower on Tuesday after hotter-than-expected US inflation figures pushed Treasury yields towards 5% and unsettled investors. The index of leading London shares finished down 31.28 points, or 0.29%, at 10,751.59, having traded as high as 10,868.51 earlier in the session.

The US Bureau of Labor Statistics reported that consumer prices rose 0.4% month on month in October, above the 0.3% rise economists had expected, although slower than September's 0.6% increase. Core inflation, which strips out food and energy, rose 0.3% for a third month in a row, above the 0.2% forecast.

Why markets reacted to the inflation figures

Barclays analyst Pooja Sriram noted it was the third consecutive upside surprise in core inflation, which she said strongly supports a Federal Reserve rate rise in December. Ahead of the figures, Fed Governor Christopher Waller said he would support a December rise and would consider a half-percentage-point increase if inflation kept accelerating. The yield on the US 10-year Treasury was quoted at 5.00% late on Tuesday afternoon, up from 4.88% on Monday, and the pound fell to $1.3323 from $1.3415.

Falling oil prices could not save the London market. Brent crude was trading at $91.74 a barrel at the London close, down from $94.27 late on Monday, and West Texas Intermediate stood at $86.60. Oil majors Shell and BP fell 2.1% and 0.8% respectively. Gold was quoted at $4,025.90 an ounce, down from $4,116.80 on Monday, sending miners Fresnillo and Endeavour Mining down 4.7% and 4.3%.

M&S leads the risers as retail sales stay sluggish

Marks & Spencer was the standout gainer, up 4.1% at 455.40p after outlining plans to double its Food sales and double its 2027 dividend to 8.4p a share. On the FTSE 250, Funding Circle leapt 13% after upgrading its full-year expectations, saying it now expects 2026 revenue of at least £275 million. The FTSE 250 ended 40.31 points higher at 24,746.65, while in Europe the CAC 40 in Paris rose 0.6% and the DAX 40 in Frankfurt climbed 0.3%.

At home, figures from the British Retail Consortium and KPMG showed total retail sales rose 1.5% year on year in the four weeks to 31 October, slightly below the 1.6% growth a year earlier, as shoppers held back spending before Black Friday and Christmas. Grocery price inflation edged up to 2.6% in the four weeks to 1 November, from 2.5% in September. Investors now look to trading statements from ITV, Spirax and housebuilder Taylor Wimpey on Wednesday, alongside inflation figures from Germany and Ireland.