UK’s main stock indexes tumbled on Monday as anxious investors awaited the announcement of a new prime minister later in the day, at a time when the country faces a cost of living crisis, industrial unrest and a looming recession.
The benchmark FTSE 100 fell 1.1%, while the domestically oriented FTSE 250 shed 1.3% as of 0803 GMT.
Both indexes declined more than 1% last week on fears around surging prices, an impending economic slowdown and policy direction under the new prime minister.
Foreign minister Liz Truss is expected to be named leader of the governing Conservative Party and Britain’s next prime minister at 1130 GMT.
Some investors are alarmed that tax cuts promised by Truss could aggravate Britain’s inflation problem, speeding up the Bank of England’s interest rate hikes and worsening a recession that the BoE expects to start this year.
The rate-sensitive banking sector declined 1.4%.
The pound fell for its seventh straight session and remained close to its pandemic trough.
“Unfortunately for the pound, a Truss victory will push the Bank of England expectations into a chaos, as she wants to scrap inflation as the monetary policy target and rely on another metric, like growth for example,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Sentiment was also pressured by a slide in European stocks after Russia extended a halt to flows on the Nord Stream 1 gas pipeline to Europe, adding to fears of winter fuel shortages and the impact on growth.
UK equities mark weekly declines
Oil majors Shell and BP eked out slim gains on firm crude oil prices as investors eyed possible moves by OPEC+ producers to cut output and support prices at a meeting later in the day.
Luxury carmaker Aston Martin fell 10.1% after it confirmed a 575.8 million pound ($659.8 million) rights issue, with backing from investors including Saudi Arabia’s sovereign wealth fund.
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