Stocks took confidence from Rishi Sunak being named the new UK prime minister on Monday, amid hope that a period of haphazard and market-spooking policymaking has ended.
‘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,’ said AJ Bell analyst Danni Hewson.
The FTSE 100 index closed up 44.26 points, or 0.6% at 7,013.99 on Monday. The FTSE 250 ended up 131.00 points, or 0.8%, at 17,337.55. The AIM All-Share closed up 2.14 points, or 0.3%, at 787.54.
The Cboe UK 100 ended up 0.8% at 701.69, the Cboe UK 250 closed up 0.8% at 14,815.98, and the Cboe Small Companies ended up 0.8% at 12,233.81.
Sunak replaces former leadership rival Truss, who announced her resignation on Thursday last week.
Market and political turmoil overshadowed Truss’s stint as PM. The pound and bond markets were pummelled last month after a poorly received mini-budget.
On Monday, however, the pound spent much of the day above the $1.13 mark, before fading back in afternoon dealings.
The pound was quoted at $1.1295 at the London equities close Monday, up from $1.1203 at the close on Friday.
Elsewhere, new figures did little to calm fears of a recession.
A survey found UK private sector output has fallen for the third straight month, fuelling fear that the country is headed for a ‘deep’ recession.
The S&P Global/CIPS flash UK purchasing managers’ index composite output measure fell to a 21-month low of 47.2 points in October, from 49.1 in September.
In the FTSE 100, Pearson ended the best blue-chip performer, ending 7.3% higher on Monday.
The London-based education publisher said its trading in the nine months to September 30 was ‘strong’, with underlying sales up 7% year-on-year.
Looking ahead, Pearson said it is on track to deliver at least £100 million of cost efficiencies next year, and it remains on track to deliver group sales and adjusted operating profit in line with consensus expectations for 2022.
Pearson Chief Executive Officer 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.’
Auto Trader rose 2.0% after selling its Webzone subsidiary, which operates under the Carzone brand in the Republic of Ireland, for €30 million.
Auto Trader noted that Carzone is the second-largest automotive marketplace for Irish retailers and consumers.
The Dublin-based operation brought in revenue of £4.9 million in the year ended March 31 and operating profit of £1.3 million.
In the FTSE 250, Bank of Georgia closed up 4.0% as Chair & Chief Executive Officer Irakli Gilauri renewed his contract for two more years until the end of 2025.
Senior Independent Director David Morrison said: ‘Irakli has led Georgia Capital since its demerger from BGEO [Group PLC] in 2018 and during this time he has developed the company into a unique institutional investment business in Georgia.’
China-focused investment firms had a rough session on Monday, with traders fretting after Xi Jinping secured a rare third term as leader of ruling Communist party in China, signalling his grip on power has no end in sight.
Fidelity China Special Situations dropped 9.8%, JPMorgan China Growth & Income fell 9.9% and Baillie Gifford China Growth Trust declined 8.6%.
Investors are fearful that Xi and his allies will continue with gruelling Covid lockdowns and other policies that have punished the world’s second-largest economy.
Despite these fears, China’s economy grew 3.9% year-on-year in the third quarter, according to official data released Monday, beating forecasts.
Beijing last week delayed the release of the third-quarter growth figures - along with a host of other economic indicators - as the country’s leaders gathered in Beijing for the five-yearly Communist Party Congress.
China had been expected to announce some of its weakest quarterly growth figures since 2020, with its economy hobbled by Covid-19 restrictions and a real estate crisis.
Nonetheless, many economists continue to think China will struggle to attain its 2022 growth target of around 5.5%, and the International Monetary Fund has lowered its GDP growth forecast to 3.2% for 2022 and 4.4% for next year.
In European equities on Monday, the CAC 40 in Paris and the DAX 40 in Frankfurt both closed up 1.6%.
The euro stood at $0.9877 at the European equities close Monday, up against $0.9802 at the same time on Friday.
Private sector output in the eurozone remained in sharp decline in October, flash data showed Monday, as energy intensive sectors are hit by higher bills.
The S&P Global flash eurozone composite purchasing managers’ index fell to 47.1 points in October from 48.8 points in September.
Against the yen, the dollar was trading at JP¥148.82 late Monday, higher compared to JP¥148.03 late Friday.
Japan’s services and manufacturing sectors are expected to improve in October, flash data showed, as activity and order book levels were boosted by the recent easing in international border restrictions and the launching of the Nationwide Travel Discount Programme.
The au Jibun Bank flash Japan services business activity index improved to 53.0 in October from 52.2 in September, indicating a second successive month of expansion and the strongest performance in four months.
Stocks in New York were in the green at the London equities close, with the Dow Jones Industrial Average up 1.2%, the S&P 500 index up 1.0%, and the Nasdaq Composite up 0.4%.
Inflation concerns and challenging demand conditions weighed on the US private sector in October, the latest flash data from S&P Global showed on Monday.
The headline flash US PMI composite output index registered 47.3 in October, down from 49.5 in September. Consensus, as cited by FXStreet, had expected a reading of 49.1.
Brent oil was quoted at $90.88 a barrel at the London equities close Monday, down from $92.84 late Friday.
Gold was quoted at $1,648.76 an ounce at the London equities close Monday, higher against $1,643.70 at the close on Friday.
In Tuesday’s UK corporate calendar, HSBC will publish its third-quarter results and Whitbread will post its half-year results.
In the economic calendar, there is a US consumer confidence reading at 1400 BST after Bank of England Chief Economist Huw Pill speaks at 0900 BST.
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