London stocks slide as rising gilt yields weigh; Reckitt gains

Sept. 1 (Reuters) - London's FTSE indexes fell on Tuesday as Middle East tensions pushed global bond yields higher on inflation concerns, while Reckitt Benckiser gained after a favourable U.S. court ruling in a baby formula case.

The export-focused FTSE 100 index .FTSE dropped 1% to a two-week low of 10,725.6 points by 1019 GMT, while the domestically-focused FTSE 250 .FTMC declined 1.9% and was shy of a one-month low. The midcap index was on track to log its biggest one-day drop since March.

• The U.S. and Iran traded fresh fire, sending Brent crude LCOc1 prices up to over $92 a barrel and sparking a bond selloff globally as investors mulled the repercussions on the world economy.
• The yield on the UK 10-year Gilt GB10YT=RR hit its highest since 2008, while investors now see the Bank of England hiking interest rates by at least 32 basis points by year end, up from around 24 bps last week, LSEG-compiled data showed.
• Rate-sensitive sectors were especially hit. Banking stocks such as Barclays BARC.L fell 3.4%, Standard Chartered STAN.L dropped 1.4% and Prudential PRU.L lost 1.3%.
• Housing goods and home construction .FTNMX402020 fell 3.3%, while precious metal miners .FTNMX551030 tanked 7.1% and led sectoral losses, tracking lower precious metal prices in the face of rising yields.
• On the data front, house prices rose in August, mortgage lender Nationwide Building Society said, reflecting demand held up despite an uncertain economic outlook.
• On the flip side, energy stocks BP BP.L and Shell SHEL.L rose 3.9% and 1.6%, respectively tracking higher crude prices. O/R

• Reckitt Benckiser RKT.L added 4.4% after a U.S. jury favoured the company in its trial over claims the company failed to warn that its products for premature babies could cause a deadly bowel disease.