(Victoria Jones/PA)
(Picture: PA Wire)Shares, gilts and sterling were all in strong demand when it became clear that Liz Truss was to step down as Prime Minister after a period of unprecedented political and market tormoil.
Immediately after the announcement the pound was up around three quarters of a cent at $.1270, while gilt yields were all down as investors looked more favourably on the prospects for UK plc.
The benchmark 10 year gilt was 5 basis points lower at 3.83%, while the long dated 30 year bond was yielding 3.92%, down around 7 basis points.
Shares were also marked higher with the FTSE-100 rising 22 points, or 0.3%, to 6947.
However, the movements were relatively modest compared with the extraordinary gyrations that followed Kwasi Kwarteng’s disastrous mini-Budget less than a month ago.
The gains also pared back once it became clear that Chancellor Jeremy hunt, seen as a safe pair of hands, will not stand in the Tory leadership election.
At 44 das Truss’s Premership is easily the shortest in the 301 year history of the office of Prime Minister.
However, it was doomed from the day Kwarteng stood up in the Commons to deliver her ill-fated growth plan. Its uncosted tax cuts panicked the markets and lit the fuse that led directly to today’s resignation.
Chris Beauchamp, chief market analyst at trading platform IG Group, said:” An initial bounce in the pound has begun to fade, as the implications of yet another period of uncertainty sink in. But given how quick the change is expected, and with the chancellor likely to stay in place, we should expect market tensions to calm. In all likelihood Rishi is ready to step in, and with Hunt in alignment with him we can expect a very different approach, but one more likely to please markets.”
Richard Burge, Chief Executive of the London Chamber of Commerce and Industry (LCCI), said: “While Liz Truss’ resignation comes as no surprise, it is shocking that the Government has allowed chaos to have free rein in recent weeks, damaging our economy and jeopardising our standing on the world stage.
Ms Truss’ resignation will not bring instant relief and it will not magically inspire confidence amongst the many businesses that are trading in the worst economic climate in decades. We should not have been in a situation so drastic in the first place and yet businesses find themselves on the brink, unable to plan for the future and secure growth.
As we prepare for yet another Prime Minister to take office, we hope that the right decisions are taken that benefit our businesses, our economy and our country, and put us firmly on the path to growth”
