Rishi Sunak's appointment as Britain's prime minister boosted the pound
The pound shot higher Tuesday as former finance chief Rishi Sunak became Britain’s prime minister, while stocks mostly rose as bond yields slid.
Sunak on Tuesday promised to bring economic stability after the turmoil that forced predecessor Liz Truss out of Downing Street.
“Right now our country is facing a profound economic crisis,” he told the nation in a televised address.
He vowed to place “economic stability and confidence at the heart of this government’s agenda”, and kept Jeremy Hunt on as finance minister.
His reassuring message resonated on bond markets, where the yields on British government bonds, or gilts, fell. Rising bond yields had helped push Sunak’s predecessor Liz Truss out of office.
“UK gilt yields have continued to track lower, as Rishi Sunak’s journey to Downing Street further improves market sentiment after a tumultuous month,” said Joshua Mahony, senior market analyst at online trading platform IG.
“With yields falling into a one-month low, we are seeing markets provide a clear vote of confidence that Sunak will manage to avoid the kind of missteps taken by his predecessor,” he added.
The pound was up 1.9 percent at $1.489 in late European trading.
A strong pound is not good for many multinational firms listed on London’s blue-chip FTSE 100 index, which ended the day down half a point.
Frankfurt stocks rose 0.9 percent and Paris jumped 1.9 percent.
Lower US bond yields also helped Wall Street, which was solidly higher in late morning trading.
Some market support also came from reports suggesting the Federal Reserve could slow its pace of interest rate hikes.
The central bank’s policy of ramping up US borrowing costs to fight decades-high inflation has hammered global markets this year as investors worry that they will send the economy into recession.
“Investors are getting more confident that inflation will soften as the consumer rethinks massive purchases,” said Edward Moya, analyst at Oanda trading group.
Consumer confidence in the United States weakened more than anticipated in October, reinforcing hopes that the Fed could slow down or pause its interest rate hikes.
“Fed rate hike expectations will remain volatile, but expectations are growing that a weaker economy will let the Fed pause their tightening after the February policy meeting,” said Moya.
Investors also had quarterly earnings reports to wade through, with better-than-expected quarterly numbers from Coca-Cola and GM helping boost sentiment.
General Motors climbed 3.3 percent as the US automaker confirmed its full-year financial forecast despite a “challenging environment”, saying that consumer demand remained strong.
Third-quarter profits rose 37 percent to $3.3 billion on soaring revenues.
Shares in Coca-Cola gained 1.6 percent as the drinks giant posted double-digit gains in revenue and profits.
Earlier Tuesday, US tech giant Meta resolved a major WhatsApp outage that prevented its popular service from connecting or sending messages.
Meta shares rose 4.1 percent.
In commodities trading meanwhile, European gas prices wobbled around 100 euros per megawatt hour, while the drop in the dollar helped global oil prices edge higher.
In Asian equities trading, Hong Kong steadied after the previous session’s rout triggered by China President Xi Jinping tightening his grip on power.
– Key figures around 1530 GMT –
New York – Dow: UP 0.8 percent at 31,742.28 points
EURO STOXX 50: UP 1.6 percent at 3,585.58
London – FTSE 100: FLAT at 7,013.48 (close)
Frankfurt – DAX: UP 0.9 percent at 13,052.96 (close)
Paris – CAC 40: UP 1.9 percent at 6,250.55 (close)
Tokyo – Nikkei 225: UP 1.0 percent at 27,250.28 (close)
Hong Kong – Hang Seng Index: DOWN 0.1 percent at 15,165.59 (close)
Shanghai – Composite: FLAT at 2,976.28 (close)
Pound/dollar: UP at $1.1489 from $1.1281 on Monday
Dollar/yen: DOWN at 147.63 yen from 148.95 yen
Euro/dollar: UP at $0.9976 from $0.9876
Euro/pound: DOWN at 86.80 pence from 87.56 pence
West Texas Intermediate: UP 0.6 percent at $85.09 per barrel
Brent North Sea crude: UP 0.2 percent at $93.45 per barrel
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