Banks lead FTSE 100 decline as bond yields, oil surge

Oct 7 (Reuters) - UK's FTSE 100 dropped on Wednesday, as financial stocks pulled the index lower after three consecutive sessions of gains, while surging bond yields and elevated oil prices kept the risk-off mood firm in markets.

The blue-chip FTSE 100 index fell 0.8% to 10,458.5 points, while the midcap FTSE 250 slipped 0.7% to a three-week low.

• Crude prices rose, with Brent futures holding around $101 a barrel, as investors weighed higher Gulf exports against persistent supply risks from the Middle East conflict and a storm approaching US oil-producing regions [O/R]

• Oil major Shell expects third-quarter refining margins to jump to a record $42 a barrel, sharply above $24 a barrel in the previous quarter

• Shell shares ended flat

• British 30-year bond yields hit a 28-year high as a larger global bond selloff pushed the US equivalent to its highest since 2002

• The sharp global bond selloff could increase pressure on finance minister John Healey ahead of his first budget

• Investors also awaited minutes from the Federal Reserve's latest meeting for further clues on the outlook for US monetary policy and the timing of any future interest-rate moves

• Heavyweight banking stocks led declines on the benchmark index, with HSBC, Standard Chartered and Barclays falling between 3.4% and 4.5%

• The Financial Times reported that HSBC plans deep job cuts in its UK wealth business as part of a broader, AI-driven efficiency push

• Pennon Group tumbled 20%, making it the biggest decliner on the FTSE 250, after the water utility launched a fully underwritten £550 million ($728.5 million) rights issue and cut its dividend

• In the currency market, sterling hit a 16-month high against the euro as France's fiscal concerns continued to weigh on the single currency

• British house prices were flat in September after recording their first annual decline since 2023 in August, according to Lloyds data, which came in weaker than analysts had expected

(Reporting by Darshan Kumar and Ragini Mathur in Bengaluru; Editing by Vijay Kishore and Chris Reese)