Global stocks and the Pound rose on Monday as markets reacted to the news that British-Indian politician Rishi Sunak emerged as the United Kingdom’s new Prime Minister.
European and American equities also climbed despite data showing Britain and Germany headed for recession and a plunging Hong Kong stock market as Chinese President Xi Jinping handed key economic posts to loyalists behind his zero-Covid strategy.
Wall Street also opened in the green on Monday, with sentiment boosted by hopes the Federal Reserve would soon slow its pace of interest rate hikes.
News that European gas prices were at a four-month low also spurred traders, as the reference Dutch TTF dipped below 100 euros for the first time since June, reaching 98.60 euros per megawatt hour at around 1030 GMT on Monday.
All eyes were on Britain as Sunak emerged 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 after his failed bid earlier this year.
“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.
“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.
Yields on UK government bonds also dropped following recent surges in the wake of Truss’s disastrous budget that led to her downfall.
Focus was also on the euro after new Italian Prime Minister Giorgia Meloni took office.
Meloni’s post-fascist Brothers of Italy scored a historic victory in general elections on September 25.
Her new government is the most far-right in Italy since World War II, and 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 1.3 per cent in early afternoon trading on Monday, mirroring strong gains in Frankfurt and Paris, while yields on Italian government bonds also fell.
London was up by 0.6 per cent in mid-afternoon trading, but the stronger pound and falling oil and gas prices were weighing on the heavyweight energy sector, according to traders.
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.
On the corporate front, Dutch medical device manufacturer Philips announced it would axe 4,000 jobs after its recall of faulty sleep respirators pushed it into a loss.
Following the news, the group’s share price dropped 0.8 per cent on the Amsterdam stock exchange on Monday.
