LONDON: Britain’s midcap stock index closed at its highest level in a month on Tuesday, with gains led by homebuilders and real estate stocks amid hopes political and economic turmoil will calm following the appointment of Rishi Sunak as prime minister.
The domestically-focused FTSE 250 index, which suffered the brunt of an equity selloff in recent weeks on concerns about the UK economy, jumped 2.85% to 17,831.63 to notch up its biggest daily advance in three weeks.
Sterling climbed more than 1%, while gilt yields fell, with 30-year gilt yields hitting their lowest since Sept. 22, the day before the “mini-budget” of former PM Liz Truss which caused a severe sell-off in the gilt market amid concerns of rising inflation and further sharp hikes in interest rates.
Sunak, who became UK’s third PM in two months, said he was not daunted by the scale of the challenge, pledging to lead the country out of a profound economic crisis and reappointing Jeremy Hunt as finance minister in a move designed to calm markets that had balked at his predecessor’s debt-fuelled economic plans.
Hunt could present a new budget on Oct. 31.
The FTSE 250 remains below its closing level of 18,714.67 on Sept. 21, the day before the mini-budget.
“All in all, Sunak has an immensely difficult job on his hands, as the UK heads into winter in a far more precarious state economically than at any point since the Great Financial Crash in 2008,” said Dan Ashmore, financial analyst at Invezz.
“Eyes will also be glued to interest rates, as the inflation situation continues to lag behind a lot of Europe,” Ashmore said. “Should Sunak’s policies be on the softer side, the BoE (Bank of England) may be forced to hike interest rates further, which will suck liquidity out of the economy and be a troubling sign for investors.” Elsewhere the blue-chip FTSE 100 closed flat as shares of banking group HSBC tumbled 6.8% after the company reported a profit slump and surprise change in chief finance officer.
ASOS gained 13.8% after Frasers Group built a more than 5% stake in the online fashion retailer.
Comments
Comments are closed for this article.