The FTSE 100 gave up early gains on Monday as UK-centric sectors weighed on the index amid deepening turmoil at the core of the UK government.
London’s leading index hit highs of 10,420 in early trading before giving back all its gains to trade at 10,360, down 0.1%, at the time of writing.
News of two high-profile resignations from the Prime Minister’s team sent a wave of concern through sectors including housebuilders, retailers, and banks, as investors rushed to reduce exposure to the UK amid mounting risks of a leadership change.
“Politics were front of mind for investors in the UK after the resignation of chief of staff, Morgan McSweeney,” said Russ Mould, investment director at AJ Bell.
“Gilt yields and the pound nudged slightly higher as markets digested ongoing speculation about the future of Keir Starmer as prime minister. Movement among government bonds and the currency suggests there is no panic on financial markets about the stability of the UK government.”
NatWest was the FTSE 100 top faller, losing 5%, after announcing the acquisition of Evelyn Partners in a £2.7bn deal. Lloyds was down 3%.
The last thing the UK housing market needs is further uncertainty, and the latest scandal at the top of government gave traders another reason to sell down holdings in Persimmon, Barratt Developments, and Berkeley Group. All three were lower by 1%.
The same sentiments were evident in British Land, LondonMetric Property, and Land Securities. UK retailers Sainsbury’s, Next, and Marks & Spencer were also lower.
Losses in London were a clear result of the crisis in Downing Street with the German Dax rising 0.25% and US futures pointing to a higher open after a strong session in Asia, driven by record highs for Japanese stocks.
“Japan’s Nikkei reached fresh records, with a stunning surge as investors cheered the certainty of policy ahead after Prime Minister Takaichi’s Liberal Democratic party secured a two-thirds supermajority in the elections,” explained Susannah Streeter, Chief Investment Strategist, Wealth Club.
“Election fever has taken hold amid big hopes that her pro-business agenda will help revitalise growth. But the big tax cuts planned risk pushing up inflationary pressures and raise questions about the sustainability of Japan’s debt pile.”