Sunak was poised to become Britain's third prime minister in less than two months
Global stocks and the pound climbed on Monday as markets reacted to the news that former finance minister Rishi Sunak was to become Britain’s new prime minister.
European markets closed in positive territory, despite data showing Britain and Germany heading for recession and the Hong Kong stock market plunging as Chinese President Xi Jinping handed key economic posts to loyalists behind his zero-Covid strategy.
Wall Street stocks also continued to rise on Monday. The Dow Jones was up by around one percent around 1530 GMT, with sentiment boosted by hopes the US Federal Reserve would soon slow the pace of its interest rate hikes.
News that European gas prices were at a four-month low also spurred traders. The reference Dutch TTF dipped below 100 euros ($99) for the first time since June, reaching 98.60 euros per megawatt hour at around 1030 GMT on Monday.
Analysts at Energi Danmark said the price fall was due to mild weather in Europe and high levels of gas stocks, with governments replenishing reserves before winter after supply cuts from Russia.
Oil prices were also down, on recession fears.
– Sunak ‘the final chance’ –
All eyes were on Britain as Sunak prepared to become the country’s third prime minister in less than two months following the resignations of Boris Johnson and Liz Truss.
His last rival for leadership of the ruling Conservative party, Penny Mordaunt, dropped out of the race on Monday, clearing the way for Sunak to become prime minister.
“The pound started the week trading higher, as many see the new potential PM as a source of some stability, particularly when compared to the chaotic term served by the Truss government, which saw massive volatility across markets,” noted XTB chief market analyst Walid Koudmani.
“Many see Sunak as the final chance for the Conservative party, as he has managed to maintain some credibility” compared with the uncertainty of the Truss and Johnson premierships, he added.
Yields on 10-year UK government bonds also dropped following recent surges in the wake of the disastrous budget that led to Truss’s downfall, while the benchmark FTSE 100 index closed 0.6 percent higher.
“Investors clearly hope Sunak will stabilise the economy and the political situation — though it’s hard to work out at this point which is the harder task,” commented AJ Bell financial analyst Danni Hewson.
Focus was also on the euro after new Italian Prime Minister Giorgia Meloni took office following her post-fascist Brothers of Italy party’s historic victory in the general election on September 25.
Meloni’s new government is the most far-right in Italy since World War II. It takes power at a time of decades-high inflation and an energy crisis linked to Russia’s invasion of Ukraine.
Milan’s stock market was up in early afternoon trading on Monday, while yields on Italian government bonds fell.
The eurozone was meanwhile looking ahead to Thursday, when the European Central Bank is expected to announce another bumper rise in interest rates aimed at curbing sky-high prices.
– Key figures around 1530 GMT –
London – FTSE 100: UP 0.6 percent at 7,013.99 points (close)
Frankfurt – DAX: UP 1.6 percent at 12,931.45 (close)
Paris – CAC 40: UP 1.6 percent at 6,131.36 (close)
EURO STOXX 50: UP 1.5 percent at 3,527.79
New York – Dow: UP 1.0 percent at 31,395.76
Tokyo – Nikkei 225: UP 0.3 percent at 26,974.90 (close)
Hong Kong – Hang Seng Index: DOWN 6.4 percent at 15,180.69 (close)
Shanghai – Composite: DOWN 2.0 percent at 2,977.56 (close)
New York – Dow: UP 2.5 percent at 31,082.56 (close)
Pound/dollar: UP at $1.1296 from $1.1258 on Friday
Dollar/yen: UP at 148.83 yen from 147.65 yen
Euro/dollar: UP at $0.9877 from $0.9863
Euro/pound: UP at 87.47 pence from 87.26 pence
West Texas Intermediate: DOWN 0.9 percent at $84.33 per barrel
Brent North Sea crude: DOWN 0.6 percent at $90.81 per barrel
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