Rishi Sunak makes first statement as Prime Minister
The pound has risen to its highest level against the dollar in weeks after Rishi Sunak’s appointment as Prime Minister. Sterling rose to $1.16 this morning while the FTSE 250 rose 0.2 percent.
On taking office, Mr Sunak pledged to lead the UK out of an economic crisis and stuck with Jeremy Hunt as chancellor.
Joseph Capurso, a strategist at Commonwealth Bank of Australia, wrote in a client note: “With Jeremy Hunt confirmed reappointed as Chancellor, we judge the political discount to GBP is fading.
“However, GBP retains a number of headwinds such as a looming recession and a growing current account deficit.”
Mr Sunak said he would try to fix the mess left by Liz Truss, restore trust in British politics and tackle a “profound economic crisis” in his first speech since becoming PM on Tuesday (October 25).
Rishi Sunak addresses the nation in Downing Street
A cluster of tall buildings in the City of London
Rishi Sunak has been warned that Penny Mordaunt could “cause trouble” for him after being denied a promotion in his Cabinet. While Ms Mordaunt had been tipped for a top job, Mr Sunak instead reappointed her as Leader of the House of Commons.
Could there be more infighting in the Government? Read more HERE.
The pound had rallied last Thursday as then Prime Minister Liz Truss announced her resignation.
At that time, sterling was up 0.5 percent at $1.1278, having headed higher ahead of the news.
While the FTSE 250 rose slightly this morning, the FTSE 100 index was down 0.1 percent by 7.47am today (October 26).
Shares of WPP dropped 3.6 percent to the bottom of the FTSE 100 after the group tempered its expectations for operating margin growth, and Reckitt Benckiser slumped 3.2 percent despite providing a positive sales outlook.
Shares of Standard Chartered and Barclays slipped even though both lenders reported higher quarterly profit.
AstraZeneca Plc jumped 2.2 percent after the British drugmaker said its experimental drug Capivasertib met the main goals of a breast cancer study.
READ ABOUT GAS PRICES FALLING
City workers cross the Millennium Bridge towards St Paul’s Cathedral
Commuters walk to work over London Bridge
The dollar index, which measures the greenback against six peers, including sterling, the euro and the yen, was little changed at 111.01, near the previous session’s trough of 110.75, the lowest level since October 5.
It comes as Foreign Secretary James Cleverly said the Government could delay the announcement of a long-awaited plan to repair the UK’s public finances.
Mr Cleverly did not confirm the date when asked about the timing of the statement, currently due on October 31 and expected to set out how the Government will plug a budget shortfall of as much as £40billion.
He told the BBC: “What we want to do is make sure that we get that right. If that means a short delay, in order to make sure that we get this right, I think that that is not necessarily a bad thing at all.”
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UK interest rate rises
Investors did not appear fazed by the possible delay with sterling trading up by nearly one percent against the US dollar, extending its recent recovery while UK Government bond prices were little changed.
Asked by Reuters to confirm the date of the statement, Mr Sunak’s office pointed to Mr Cleverly’s comments.
On the fiscal statement, the foreign secretary told Sky News in a separate interview: “We know it needs to come soon. We know people want certainty. We know people want a clearer idea of the government’s plans.”
Any delay could affect the Bank of England’s plans as it ponders its interest rate announcement due on November 3 and prepares to begin selling bonds from its quantitative easing programme on November 1.
The start of those bond sales was pushed back by a day last week to accommodate the fiscal statement.
People walk past the logo of the London Stock Exchange inside of the London Stock Exchange offices
Meanwhile, Asian shares edged higher today as investors clung to hopes that the pace of US and global rate hikes will start to slow, though US futures dropped after disappointing results from tech giants Alphabet and Microsoft.
E-mini futures for the S&P 500 fell one percent in early trade after Google-owner Alphabet posted softer-than-expected ad sales after the bell and Microsoft missed expected revenue forecasts, possible early signs of a slowdown in the US economy.
MSCI’s broadest index of Asia-Pacific shares outside Japan was up one percent, led by a bounce in Hong Kong, while Japan’s Nikkei rose 1.1 percent by mid-morning.
The mainland Chinese benchmark index advanced one percent, while Hong Kong stocks rose two percent, attempting another rebound after Monday’s deep sell-off in Chinese assets by global investors worried about Beijing’s policy direction.
US economic data yesterday (October 25) showed slowing home price growth and souring consumer confidence with some signs the Federal Reserve’s aggressive interest rate hikes are starting to cool the labour market.
Ray Attrill, head of FX strategy at National Australia Bank in Sydney, said in a note: “Continuing the theme of bad (economic) news is good news (for risk markets), US equities are continuing to bask in the afterglow of last Friday’s hints of a step-down in the pace of Fed tightening.”
Traders and economists predict another 75 basis point (bps) increase from the Fed next Wednesday, but the view is growing for a slowing to half a point in December.
Treasuries rallied sharply overnight, with the yield on benchmark 10-year US Government debt down more than 12 bps. It was steady at 4.0937 percent today.