Sterling is trading higher against the US dollar as Rishi Sunak is poised to become prime minister.

The pound, which finished last week at $1.11, stood at around $1.135 after Boris Johnson revealed he is not standing in the Conservative leadership race.

The developments mean the chances of a delay to next Monday’s budget have receded, leading to an softening for UK gilt yields.

FTSE 100 Live Monday

• Gilt yields fall on hopes for political stability

• Frasers Group ups stakes in Hugo Boss and Asos

• China-focused stocks slide as leader tightens grip

Investors cautiously hopeful after Rishi Sunak confirmed as Britain’s next PM : FTSE wrap

Monday 24 October 2022 16:54 , Simon Hunt

The FTSE 100 closed up 52 points to 7,022 as investors appeared buoyed by the confirmation of Rishi Sunak as Britain’s next prime minister.

After rising earlier this afternoon on news Penny Mordaunt had withdrawn from the Conservative leadership race, the pound later fell down 0.5% to US$1.1281. Yields on 2-year gilts fell around 0.5% in a sign the bond market was beginning to calm.

Danni Hewson, AJ Bell financial analyst, said: “Markets have signalled Rishi Sunak will be given time to deliver, with gilt yields falling and the British economy getting a tentative second chance to get back on track. But there’s no getting away from the scale of the challenge that faces the new prime minister. The last few weeks have left the UK economy badly bruised, and the volatility of the pound today lays bare the huge task ahead.

“Stability, stability, stability. Three words that after the last few weeks have taken on huge importance and remain at the forefront of what the British economy needs right now. Credibility is hard won and easily lost, and the fact the new prime minister has tried his hand from the desk over at number 11 will play a massive part in shoring up confidence.

“But Mr Sunak will have to work fast and smart. Next Monday’s independent health check from the OBR must be published and a pathway must be laid, even if it’s all uphill and littered with potholes.”

Sunak gives statement after winning Conservative leadership race

Monday 24 October 2022 16:12 , Simon Hunt

Rishi Sunak has given a statement after winning Conservative leadership race.

In telelivised remarks he said: “I am humbled and honored to have the support of my parliamentary colleagues.

“It is the greatest privilege of my life to serve the party I love and give back to the country I owe so much to.

“There is no doubt we face a profound economy challenge. We now need stability and unity.

“I pledge that I will serve you with integrity and himilty and I will work day in day out to deliver for the British people.”

City Comment: Sunak must balance the books and restore confidence in the UK economy

Monday 24 October 2022 15:59 , Simon Hunt

A former adviser to Liz Truss tells the Standard what he thinks should be Rishi Sunak’s first priorities when in government:

Ben Ramanauskas said: “Sunak’s first challenge will be restoring confidence in the UK’s economy. The very fact that he is set to become Prime Minister should reassure the markets and he can build on this by immediately announcing that he intends to keep Jeremy Hunt as Chancellor. Going forward he should confirm that there will be a full statement on the nation’s finances on October 31st accompanied by a forecast from the independent OBR where he will commit to reversing the fiscal policies set forward in the so-called mini-budget. He should also look again at the support package to deal with high energy costs and instead think about introducing a more targeted scheme which focuses on helping low income households.

“Although it will be deeply unpopular with Tory voters, he should also take a look at the pension triple lock. Although it is right that we look after the elderly, the books should not be balanced on the backs of younger working people. Sunak should ensure that the poorest pensioners (alongside other benefit recipients) receive an increase in line with inflation, this should not be the case across the board.

“Sunak will no doubt face pressure to slash the foreign aid budget in order to save money. This would be a mistake. The UK should stand by its commitment to the poorest people in the world by maintaining spending on international aid at the current level. Not only is this good for the planet’s poorest people, it also helps bolster the UK’s international standing.”

read more here: Sunak must balance the books and restore confidence in the UK economy

US-listed Chinese stocks plummet on fears of new Xi era

Monday 24 October 2022 15:45 , Simon Hunt

US-listed Chinese stocks plummeted shortly after the Wall Street open this afternoon as Xi’s choice of loyalists for China’s new governing body raised speculation the regime will be driven by ideology rather than growth-focused policies.

Shares in Pinduoduo tanked 28.8%, while Alibaba shares went down 16.7% and JD shares fell 18.8%, wiping over $75 billion from the combined value of the three companies.

Rupert Thompson, Investment Strategist at Kingswood, said: “China saw President Xi Jingping consolidate his hold on power with his appointment for a third-year term and a new leadership team full of party loyalists. GDP rebounded a stronger than expected 3.9% in the third quarter from the lockdown-related 2.6% drop seen the previous quarter.

“Even so, with no major relaxation of the zero covid policy in sight and a renewed emphasis on ‘common prosperity’ with its emphasis more on income redistribution rather than growth maximisation, the economic rebound looks set to remain a sluggish affair.”

UK stocks hit session highs as Sunak set to become prime minister

Monday 24 October 2022 15:09 , Simon Hunt

The FTSE 100 hit session highs after it became clear Rishi Sunak was set to become the UK’s next prime minister.

The index topped 7,000, climbing more than 70 points from its opening of 6,976.

Rishi Sunak to address Tories

Monday 24 October 2022 14:38 , Simon Hunt

Rishi Sunak will address the Conservative Parliamentary Party today in a Commons committee room, Sir Graham Brady confirmed.

The 1922 Committee chairman said that the new Tory leader will speak to MPs in Committee Room 14 later this afternoon.

City reacts as Rishi Sunak set to become Britain’s next PM

Monday 24 October 2022 14:19 , Simon Hunt

City analysts are reacting to the news Rishi Sunak is set to become Britain’s next PM after Penny Mordaunt announced she was withdrawing from the race.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: ‘’Gone are the days when Rishi Sunak was prepared to open the government coffers up to see the UK through a crisis. The pandemic spending spree is well and truly over and the former Chancellor will take the top job in the guise of a strict and austere headteacher.

“Ties of loyalty to Boris Johnson still run deep though, and Rishi Sunak will find it hard to shake the traitor tag attached at the time of Johnson’s downfall. Garnering support across a divided party for highly unpopular spending cuts will be a hard task. He is likely to stay highly reliant on the hard Brexit wing of the party for support, which is likely to mean that hopes of a softening approach in talk with the EU on trade are likely to be wishful thinking.

“With his experience as a hedge fund manager and the time he’s spent in California, right in the heart of the big tech industry, he will be expected to give a rocket boost to home grown tech talent. This will be no quick fix though, and new tech listings are likely to still be few and far between in the UK given the risk premium still attached to UK assets.”

Lawrence Bowles, director of research at property firm Savills, said: “The uncertainty of the last few months has had a material impact on gilt rates: the rate at which the UK government can borrow. In turn, this impacts the cost of borrowing for the rest of us. It affects mortgage rates for home buyers, development debt costs for housebuilders, and refinancing costs for property investors.

“Anything that helps bring certainty and confidence back to the market is likely to reduce borrowing costs. That, in turn, will reduce affordability pressure for households securing mortgage finance, for housebuilders starting on new sites, and for investors buying and operating homes for rent.

“In that sense, the trajectory of gilt rates over the last few days is reassuring. While government borrowing costs remain far higher than they were in the summer, they have declined substantially since the highs immediately following the so-called “mini” Budget. And with more breathing room, lenders should feel the confidence to put more products back out to the market.”

John Dickie, Chief Executive, BusinessLDN, said: “The new Prime Minister’s central priority must be to restore the UK’s reputation as a sound place to invest after weeks of unrealistic policies, u-turns and confusion. Businesses are desperate for stability from government ahead of a challenging winter.

“The Chancellor has difficult tax and spend decisions to take to restore market confidence. There are however some low cost or cost-neutral reforms which would strongly support growth. These include bringing back VAT-free shopping for international visitors; reforming the Apprenticeship Levy, and allowing City-mayors to consolidate their funding streams so they can spend on what will best drive growth locally.

“The capital has a powerful role in growing the UK economy, and we look forward to working with the new government to strengthen London’s competitiveness to benefit the whole country.”

Pound nudges up and gilt yields down as Sunak wins PM battle

Monday 24 October 2022 14:03 , Simon Hunt

The pound made gains and gilt yields fell as Penny Mordaunt announced she was dropping out of the Conservative leadership race.

Sir Graham Brady has confirmed Rishi Sunak has become the new leader of the Conservative party and therefore the new prime minister.

Pound falls as investors react to poor PMI data

Monday 24 October 2022 12:41 , Simon Hunt

The pound has erased gains made last night over the past couple of hours as investors reacted to new data showing private sector output had dropped for the third month running.

The pound lost around two-thirds of a cent against the dollar to $1.1274. It had reached highs of $1.1380 last night as traders welcomed the news that Boris Johnson wouldn’t be running as a candidate to be leader of the Conservative Party.

The S&P’s PMI index showed new orders had decreased at their sharpest pace since January 2021, with a steep fall in business expectations for the year ahead.

Gilt yields drop as Rishi tipped to become PM

Monday 24 October 2022 11:04 , Simon Hunt

Here’s a look at how the gilts market responded this morning after Boris Johnson withdrew from the Conservative leadership race, putting Rishi Sunak in pole position to become Britain’s next prime minister.

Chink of light for markets as Rishi gets ready

Monday 24 October 2022 10:19 , Simon English

THE pound railed, government borrowing costs fell and a turbulent stock market regained some sense of calm as markets welcomed signs of stability from central government.

With former chancellor Rishi Sunak on track to be the new Prime Minister, leading economic indicators at least stopped pricing in Armageddon after several weeks of turbulence.

While the latest economic figures remain challenging, there was some sense of calm today.

UK business activity fell for a third month in a row in October, according to the latest PMI figures.

That measure of growth fell from 49.1 in September to 47.2 – any figure above 50 indicates growth, so today’s number suggests a tough recession and was far worse than City experts expected.

But the pound was up by nearly a cent to $1.136 – fears that it would hit parity with the dollar are in the background for now.

And the mass sell-of of government bond that caused chaos for pension funds and forced an intervention from the Bank of England is abated.

The yield on 10-year UK gilts fell from above 4% to 3.8% today, a sizeable drop that reduces future government borrowing costs and is a sign of faith in the expected new government.

Susannah Streeter at Hargreaves Lansdown said: “It’s an indication that bond vigilantes have been pacified by the expectations of a calmer political horizon ahead with fiscal responsibility forecast to be the new mantra of the incoming Prime Minister. Whoever clinches the leadership, faces a daunting task given the looming recession, volatile energy prices, continued supply chain tangles and labour shortfalls and a Bank of England determined to raise interest rates in the face of a shuddering economy to bring rampant inflation under control.”

The Bank was today under less pressure to ramp up rates, however, precisely because bond yields are falling.

Interest rates are now expected to hit 5% next year, down from above 6% a few weeks ago. That should be good news for those renegotiating mortgage deals.

The FTSE 100 was down 42 points to 6923, led by falls in companies that make most of their money abroad, a reflection of the relative strength of the pound today.

The wider mood music remains gloomy. Billionaire private equity king and Tory donor Guy Hands told the BBC that the UK economy is “frankly doomed” with the UK “on a path t0 be the sick man of Europe”.

AJ Bell financial analyst, Danni Hewson said: “At least PM-in-waiting Rishi Sunak knows he’s got the markets on his side. 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. As well as the recovery in sterling and the reduced cost of government borrowing, Sunak will be pleased to see European gas prices going in the right direction thanks to mild temperatures across the continent. And while the outlook is still filled with dark clouds, for the first time in a while it is possible to spy a chink of light.”

Mike Ashley targets Hugo Boss and Asos

Monday 24 October 2022 10:18 , Simon English

MIKE Ashley, the Sports Direct founder who increasingly looks like the king of UK retail, today upped his stake in both Asos and Hugo Boss.

His Frasers Group, now led by his future son-in-law and CEO Michael Murray, now owns 5% of fading fast fashion chain Asos and 4.3% of Hugo Boss.

It has a much higher stake in the famed German clothing and perfume house if you include options, known as puts.

A statement today said: “Frasers Group has extensive ambitions to grow the business inside and outside of the UK and is constantly exploring the potential for further expansion.”

The move was the latest example of its “its drive to expand and acquire businesses and brands that can strengthen Frasers Group”.

Over the years Frasers has taken over Jack Wills, Evans Cycles, Dunlop and House of Fraser, among others.

Frasers share price rose 5p to 626p today.

Prudential under pressure amid Hong Kong slide

Monday 24 October 2022 10:15 , Graeme Evans

Shares in Prudential and tech giant Alibaba have fallen sharply as fears mount over the tighter grip of China’s President Xi Jinping.

Hong Kong’s Hang Seng index also slumped 6.4% to its lowest level in 13 years after Xi’s choice of loyalists for China’s new governing body raised speculation the regime will be driven by ideology rather than growth-focused policies.

The prospect of a regulatory clampdown on the technology sector meant the Hong Kong shares of e-commerce giant Alibaba and internet company Tencent tumbled 12%.

In London, Prudential slumped 6% amid the potential for a fresh setback for the insurer’s pivot to a Asia-focused strategy, having already suffered from the impact of Covid lockdowns and Hong Kong border closure.

The Pru weakened to its lowest level of the year at 820p before settling 49.8p cheaper at 836.2p. Appetite for mining stocks also diminished as Rio Tinto, Glencore and Anglo American saw their shares retreat 2%.

The declines came despite delayed economic data showing China’s third quarter GDP beat expectations with a reading of 3.9%. However, retail sales were below hopes at 2.5%, adding to worries about the impact of Covid and a faltering property sector.

The commodity-led pressure ensured the FTSE 100 index under-performed markets in Europe, where hopes for a softening in the approach of US policymakers to higher interest rates boosted sentiment.

Richard Hunter, head of markets at Interactive Investor, said: “A rise of 0.75% in November is still seen as almost certain, but for December there could be a lesser hike as the impacts of the rises hitherto wash through.”

The top flight retreated 22.08 points at 6947.65, with other fallers including the Tencent and Alibaba backer Scottish Mortgage Investment Trust with a decline of 9.4p to 738.8p.

On the risers board, UK-focused stocks benefited from hopes of an end to recent political turmoil and Auto Trader improved 18.4p to 504.6p after it announced the sale of Ireland’s Carzone brand in a deal worth 30 million euros (£26 million).

The FTSE 250 improved 63.50 points to 17,270.05, with investment platforms CMC Markets and AJ Bell among stocks doing well. Big fallers included Fidelity China Special Situations, which lost 13.5p to 193p.

Philips to cut 4,000 jobs as CEO seeks to restore reputation

Monday 24 October 2022 10:04 , Simon Hunt

The boss of Philips has said he will cut as many as 4,000 jobs, just nine days after stepping into the role as he seeks to chart a new course to restore the reputation of the beleaguered health technology firm.

CEO Roy Jakobs, who become CEO on the 15^th of October, said the move was part of a drive to improve patient safety and quality management after the firm shocked investors when it was forced to recall millions of devices over health concerns in June last year.

The Amsterdam-based business posted a whopping 1.5 billion Euro (£1.3 billion) loss as sales fell 5% to 4.3 billion Euros in the third quarter. The firm said it expected a further downturn in sales in the next quarter.

The job losses represent a cut of about 5% of the workforce, and will be part of a 300 million Euro restructuring programme in a bid to slash costs and improve productivity.

Jakobs said: “My immediate priority is to improve execution so that we can start rebuilding the trust of patients, consumers and customers.

“This includes the difficult, but necessary decision to immediately reduce our workforce by around 4,000 roles globally, which we do not take lightly and will implement with respect towards impacted colleagues. These initial actions are needed to start turning the company around.”

Philips shares fell 2.4% to 13.08 Euros this morning. The stock has fallen almost 70% over the past twelve months, after the firm revealed it had to recall some 5.5 million ventilators over potential health risks in June last year.

UK-focused stocks rally, FTSE 100 lower

Monday 24 October 2022 08:24 , Graeme Evans

Gilt yields have fallen and the pound is higher on hopes that Rishi Sunak’s likely appointment as prime minister will lead to an easing in the recent political turmoil.

The yield on 10 year gilts stood at 3.82% this morning after a fall of around 23 basis points, while sterling was about 0.5% higher at 1.135.

Stocks in the banking, property and retail sectors rallied but the international-focused FTSE 100 index surrendered an initially positive start to trade 0.2% lower at 6954.03.

Next, Lloyds and Persimmon were among those up by around 3%. The UK-led FTSE 250 index rallied 0.8% or 149.22 points to 17,355.77, with Virgin Money, easyJet and Travis Perkins all sharply higher.

Pearson gets a boost from English language learning as sales swell 7%

Monday 24 October 2022 07:55 , Simon Hunt

Pearson sales went up 7% in the 9 months to September, led by a 28% jump in its English language learning division.

The firm said it was on track to deliver its profits and sales forecasts and planned to deliver £100 million in efficiencies over the next year.

Pearson boss Andy Bird said: “We believe Pearson is well positioned for the future, and we are confident of being able to navigate the challenging macroeconomic environment.

“We are making strong progress in creating a digital learning ecosystem which can serve many more people across their lifetime of learning. This will lead to better outcomes for our learners and also deliver value for our shareholders and wider stakeholders.”

FTSE 100 higher, bank sector results awaited

Monday 24 October 2022 07:51 , Graeme Evans

The FTSE 100 index is poised to open marginally higher after US markets staged a big rally on Friday, aided by signals from policymakers that the Federal Reserve may be ready to slow the pace of interest rate hikes.

Wall Street recorded its best weekly performance since June, while the FTSE 100 index and the FTSE 250 also finished last week up by 1.6% and 1% respectively.

As well as bond market moves on both sides of the Atlantic, traders will have a steady stream of corporate results to watch for this week. They include third quarter numbers from all four of the UK’s big lenders.

The week ahead also includes Thursday’s European Central Bank policy decision, with economists expecting another 0.75% hike.

HK shares slide, China GDP beats hopes

Monday 24 October 2022 07:29 , Graeme Evans

Hong Kong’s Hang Seng index has fallen 6% amid worries about President Xi Jinping’s tightening of power at China’s 20th Party Congress.

The reaction to his third five-year term in office and the appointment of a loyalist as second-in-command left the Hong Kong benchmark at its lowest level for 13 years. Big fallers included the technology giant Alibaba, which dropped more than 10%.

Delayed economic data released after the conclusion of Congress showed third quarter GDP beat expectations with a reading of 3.9%, which compared with the 0.4% rise seen in the previous quarter when lockdown curbs hit the performance.

Industrial production was also higher than expected in the third quarter at 6.3% but retail sales missed forecasts following growth of 2.5%.