Truss resignation brings ‘brief respite’ for investors as pound rallies
The FTSE 100 closed 18.92 points higher, or 0.27%, at 6,943.91.
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Your support makes all the difference.Liz Truss’s record-breaking short stint in charge of the UK has provided some “brief respite” for investors – but they now crave stability, analysts have said.
The Prime Minister’s monumental resignation sent the pound and Government bonds upward while the FTSE 100 tipped into the green.
The FTSE 100 closed 18.92 points higher, or 0.27%, at 6,943.91.
The pound shot up to 1.13 US dollars just before Ms Truss’s speech as markets anticipated her resignation. Though easing backing slightly, sterling held onto its gains and was up 0.45% to 1.127 US dollars when markets closed, and up 0.05% to 1.1484 euros.
The interest on Government bonds – known as gilt yields – eased in response to the announcement. It suggests traders were approving of her departure as they are not rushing to let go of Government debt.
As far as investors are concerned, the future is marginally brighter without her in charge
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “Sterling is highly sensitive to economic policy uncertainty and even though the ship Britannia will still be left largely rudderless, with a successor still to be chosen, as far as investors are concerned, the future is marginally brighter without her in charge.”
But analysts also pointed out that the political turmoil is far from over and the modest uplift in UK markets reflects investors’ desire for stability.
Ms Streeter added: “With the third prime minister in just a year expected to be announced by the end of the month, the UK will still be viewed in financial markets as politically unstable.
“What investors crave is more steadiness and reliability but until they know who will take charge and lead an economic recovery, that stability still remains highly elusive which means that neither sterling nor stocks are likely to make any big strides of progress.”
Others were more sceptical about how far the new Prime Minister will be able to settle the markets.
While this has brought about a brief respite to the political risk premium, it is hard to see how any replacement will be able to coalesce around any form of unity of policy in this dumpster fire of a government
Michael Hewson, chief market analyst at CMC Markets UK, said: “The pound has undergone a modest rebound and yields have slipped back after UK Prime Minister Liz Truss announced she was stepping down.
“While this has brought about a brief respite to the political risk premium, it is hard to see how any replacement will be able to coalesce around any form of unity of policy in this dumpster fire of a government.”
Stock markets elsewhere in Europe were holding onto gains from earlier in the week. The German Dax was 0.2% higher and the French Cac was up 0.76% at close.
Sentiment was also strong in the US where its top indices were moving up in early trading. The S&P was up 0.3% and Dow Jones lifted 0.6% when European markets closed.
In company news, shares in online wine retailer Naked Wines soared after the company said it was overhauling its board and spending plans, and admitted to shareholders that it had made mistakes in pursuit of ambitious growth.
The firm said it would be cutting marketing and administrative spending by £18 million and slimming down its workforce.
Shares were up by 29% at the end of the day.
Homewares retailer Dunelm cautioned investors of a “challenging winter” for consumers, but said that it was well positioned to offer shoppers good value.
Nevertheless, its sales were down 8.3% for the 13 weeks to October 1 compared to the same period last year.
Its shares slipped by 1.8%.
Meanwhile, bus and coach group National Express said that its sales had been boosted by train strikes and the Queen’s funeral during which its services became key.
The company reported an uplift in its sales by a third in the latest quarter.
Shares in National Express edged up by 2.1%.
The biggest risers on the FTSE 100 were Fresnillo, up 27.2p to 713.6p, Lloyds Banking Group, up 1.44p to 42.05p, Endeavour Mining, up 51p to 1,512p, Ocado Group, up 15.9p to 493.9p, and Land Securities Group, up 16.2p to 531.8p.
The biggest fallers on the FTSE 100 were Vodafone Group, down 2.44p to 98.72p, Bunzl, down 58p to 2,720, BT Group, down 2.25p to 125.45p, Coca-Cola, down 33p to 1,926.5p, and International Consolidated Airlines Group, down 1.98p to 116.12p.