London and New York markets fell on Tuesday as rising Treasury yields and doubts over US rate cuts weighed on sentiment.

Stock markets turned lower at the start of September, with the FTSE 100 down nearly 1% and Wall Street following suit. Investors sold off equities as government borrowing costs surged in the US, UK and Europe, raising questions over central banks’ room to ease policy.

The US Federal Reserve is expected to cut rates this month after Jerome Powell hinted at action, but traders remain uncertain about how far the central bank can move while yields keep climbing. The 30-year US Treasury yield rose to 4.96%, closing in on the key 5% threshold for the first time since July. The 10-year yield also advanced toward 4.3%.

In Britain, the 30-year gilt yield reached 5.68%, its highest since 1998, creating a budget headache for Chancellor Rachel Reeves ahead of the autumn statement. Germany’s 30-year bond yield climbed to a 14-year high, mirroring US moves.

Key Points in Markets Today

• FTSE 100 fell 0.7% in afternoon trade, retreating from record highs in August.

• DAX lost 1.7% and CAC slipped 0.6%, while the STOXX 600 fell 1.2%.

• Wall Street opened sharply lower: Dow Jones down 1.2%, S&P 500 off 1.3%, Nasdaq down 1.8%.

• Pound slid 1% against the dollar, on course for its weakest day in three months.

• Eurozone inflation ticked up to 2.1% in August, topping the ECB’s target.

Market analysts highlighted the contradiction for governments. Lale Akoner of Etoro noted that while strong demand for UK gilts shows investors still view them as attractive at high yields, rising borrowing costs risk undermining fiscal stability.

In the eurozone, inflation pressures resurfaced, led by higher food and alcohol prices, which rose 3.2% year-on-year. Energy remained cheaper, down 1.9% from last year, but core inflation stayed stuck at 2.3%.

The sell-off underscores how sensitive markets remain to the balance between interest rate expectations and debt costs. September has historically been a volatile month for equities, and early trading is keeping that pattern intact.