Yahoo Finance FTSE 100 up as Rishi Sunak set to become UK's first British Asian prime minister
The FTSE 100 (^FTSE) closed 0.7% higher on Friday as investors eye a potential end to Britain's political uncertainty and the turmoil of the country's finances as Rishi Sunak closed in on Downing Street.
In Frankfurt, the DAX (^GDAXI) rose 1.5% on the day, and the CAC 40 (^FCHI) was up 1.6% in Paris.
The export-heavy London bluechip index rose despite a stronger pound and weaker oil prices.
"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," Danni Hewson, financial analyst at AJ Bell said.
"The last few weeks have left the UK economy badly bruised, and the volatility of the pound today lays bare the huge task ahead."
Read more: Pound extends gains as Rishi Sunak poised to become prime minister
Sunak is on course to become the UK's next prime minister and first PM of Asian origin after Penny Mordaunt conceded the contest at the last minute after failing to secure the 100 votes needed.
At age 42, the former chancellor will be the youngest prime minister in modern British history.
Sunak, who was Liz Truss's leadership rival could be installed as PM as early as Monday if King Charles III invites him to form his government ahead of Jeremy Hunt's crucial 31 October budget.
It comes as Boris Johnson dropped out of the race to become next prime minister over the weekend despite reportedly securing more than the 100 votes needed.
Sterling rose 0.5% to $1.130 and 10-year gilt yields fell back sharply from above 4% on Friday to 3.8%.
"News that Rishi Sunak will become the next UK prime minister has spared markets any additional uncertainty today, with the UK essentially set to be steered through this crisis by two chancellors," Joshua Mahony, senior market analyst at online trading platform IG, said.
"Gilt markets have certainly responded positively, with falling yields bringing hope that we will see borrowing costs continue to ease after a turbulent Truss tenure."
Wall Street indices traded in mixed territory as the prospect of a slower pace of interest rate hikes and the latest batch of corporate earnings boosted stocks.
The Dow Jones (^DJI) was up 0.9% after registering its best three-week stretch since November 2020. The S&P 500 (^GSPC) advanced 0.6%, and the tech-heavy Nasdaq (^IXIC) lost 0.1% at Europe's close.
Richard Hunter, head of markets at Interactive Investor, said: "Comments from some Federal Reserve members and newspaper reports combined to imply that the pace of rises may need to slow to avoid an unwanted recession in the world’s largest economy. 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.
"At the same time, the terminal rate also eased, with markets now pricing in a terminal rate of under 4.9%, edging down from the previously expected 5%."
Read more: New prime minister could delay Jeremy Hunt's 31 October budget announcement
Asian stocks finished mixed overnight. The Hang Seng (^HSI) crashed 6.5% in Hong Kong, and the Shanghai Composite (000001.SS) fell 2% in mainland China. The benchmark Nikkei (^N225) was the outlier, closing up 0.3% in Japan.
The slump in Chinese stocks follows a delayed release, which showed that China’s economy rebounded at a better-than-expected 3.9% in the third quarter, and leader Xi Jinping secured a historic third term in power in Beijing.
