UK shares and bonds slipped further after yesterday’s 2.2% slump in the Ftse 100 following a stronger-than-expected report on the US jobs market sent global markets reeling.

The UK’s blue-chip index deepened its losses on Thursday to sink 161 points to 7,280 after the ADP National Employment report showed private US payrolls jumped 497,000 last month, against expectations for a 228,000 increase.

Fears that the US and other countries will have to hike interest rates further to curb inflation and risk a recession saw the mid-cap FTSE 250 index slump 2.6% to 17,916 amid a Europe-wide sell-off that saw France’s Cac 40 slide 3.1% and the Eurostoxx 50 plunge 2.9%.

Amid trepidation what today’s US non-farm payrolls data will bring at 12.30pm saw the FTSE shed another 0.4% or 28 points to 7,252 this morning. The FTSE 250 slipped 0.3% to 17,869 after choppy trading in Asia with Japan’s Nikkei 225 off 1.2% and Hong Kong’s Hang Seng off 0.8%.

Government bonds have fallen with yields on two-year UK gilts jumping to 5.62% as investors bet that sticky inflation will force the Bank of England to raise interest rates to a 25-year high of 6.5% by December.

The pound was steady at $1.2744 after the dollar rose at the prospect of two rather than one more rise in the Federal Reserve’s funds rate this year.

Commenting on yesterday’s data, Investec’s chief economist Philip Shaw said: ‘The jury is still out regarding how good a guide this is to tomorrow’s US payrolls data, not least because the methodology used by ADP has changed less than a year ago so ADP’s consistent track record is short.

‘The reaction in markets however reveals great nervousness that inflation may be hard to quell and that correspondingly central banks may need to keep rates very high for longer.’

Richard Hunter, head of markets at Interactive Investor, said: ‘The consensus for the non-farms has ticked higher over recent days, and now estimates that 240000 jobs will have been added in June, as compared to 339000 in May.

‘However, the likelihood of a hotter number is hanging in the air, which has caused some consternation among investors who are becoming increasingly resigned to a longer period of higher interest rates becoming entrenched. A further interest rate hike at the July meeting is all but nailed on according to estimates, which will then potentially lead to another rise in September.’

Amid falls in utilities, consumer and industrial stocks, Coca Cola HBC (CCH) was one of the few blue chip gainers, jumping 3.6% after the bottler raised its profit expectation for 2023.

Challenger bank OSB (OSB) crashed 15%, or 71p, to  399p after warning net interest income would be £160m-£180m lower in the first half due to borrowers remortgaging quicker after their fixed rate deals expired.

Shell (SHEL) eased 0.4% or 5p to £22.56 after the oil and gas giant warned second-quarter trading at its gas division will be ‘significantly lower’ than the previous quarter, due to seasonal factors.

Also weighing on UK sentiment was news that British house prices fell last month at their fast annual rate in 12 years. According to mortgage lender Halifax, house prices dropped 2.6% year-on-year in June, after a 1.1% fall in May, Halifax said. Prices fell 0.1% last month after a 0.2% monthly drop in May.

Kim Kinnaird, director of Halifax Mortgages, said soaring mortgage costs made further weakness in the coming months likely.