The FTSE 100 reversed early losses on Monday as Rishi Sunak looked set to win the race to be the next UK Prime Minister.
Rishi Sunak has over half of Conservative MPs backing him while Penny Mordaunt’s campaign said she had over 90. Backing from 100 MPs is required to be entered into the ballot of Conservative party members later in the week. If Mordaunt fails to achieve 100 backers before 2pm, Sunak will become Prime Minister.
The pound had rallied early in session putting pressure on the FTSE 100’s heavy weight overseas earners. However, as the session progressed the FTSE 100 turned positive lifted by Pearson and sectors exposed to the UK economy.
Autotrader gained 6% and Whitbread added 3.5%. Whitbred is set to release half year results tomorrow.
The UK banks and housebuilders were snapped up by traders piling back into UK assets after Boris Johnson announced he was pulling out of the race.
Gains GBP/USD faded through the session and helped mega caps such as BP, AstraZeneca, and Diageo bounce back from early weakness adding a significant number of points to the FTSE 100.
Although Rishi is being perceived as a the safer option to take up the role at Number 10, whoever becomes the next PM will have face a number of challenges that have no easy answer.
“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,” said AJ Bell financial analyst, Danni Hewson.
“Assuming Sunak gets his coronation later today, attention will likely turn to the new fiscal plan set to be announced a week today on Halloween. Clearly the aim will be to avoid doing anything which might spook the market.”
Earnings season
Markets are geared up to receive a plethora of corporate results in the coming days. After a period where investors have been intently focused on politics and central banks, company earnings have the opportunity to set the tone in equity markets once more.
“There is likely to be a certain amount of treading water ahead of a heaving week of results with some big hitters on indices reporting financial results,” said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.
HSBC, Whitbread, Barclays, Standard Chartered, Reckitt Benckiser, Shell and Unilever are all set to report this week.