FTSE 100 closes higher as Penny Mordaunt throws her hat in the ring to replace Truss
The FTSE 100 (^FTSE) clawed back losses on Friday as the Conservative party scrambles to find a new leader after Liz Truss stepped down on Thursday.
London's bluechip index eked out a 0.1% gain at close after tumbling 0.8% during the day, the CAC 40 (^FCHI) was 1% lower in Paris, while the DAX (^GDAXI) slid 0.4% in Frankfurt.
Read more: Rishi Sunak bookmakers' favourite to replace Liz Truss as UK's next prime minister
Commons leader, Penny Mordaunt announced she is running to replace Truss as leader of the party and prime minister, after defence secretary Ben Wallace and chancellor Jeremy Hunt ruled themselves out.
Rishi Sunak and former PM Boris Johnson are also touted as favourites to become the next occupants of 10 Downing Street.
I’ve been encouraged by support from colleagues who want a fresh start, a united party and leadership in the national interest.
I’m running to be the leader of the Conservative Party and your Prime Minister - to unite our country, deliver our pledges and win the next GE.#PM4PM pic.twitter.com/MM0NTHJ5lH
— Penny Mordaunt (@PennyMordaunt) October 21, 2022
"Traders are faced with yet another bout of political uncertainty, with Penny Mordaunt officially throwing her hat into the ring for a potentially doomed two-year stint that will likely be dominated by inflation and recession," Joshua Mahony, senior market analyst at online trading platform IG said.
Truss's resignation after just 44 days in office makes her the shortest serving prime minister in modern British history.
Her downfall was set in motion by her disastrous mini-budget, which sparked turmoil in the pound and financial markets and forced her to backtrack on the tax-slashing agenda that brought her into Downing Street.
Read more: Pound hits one week low on gloom economic data and political chaos
Graham Brady, chair of the 1922 committee said that candidates to replace Truss as leader of the party will need at least 100 nominations from Conservative MPs.
That means that the maximum number of candidates able to stand is three. During the last leadership race, Sunak won 137 nominations, Truss 113 and Mordaunt 105.
A new prime minister is expected to be in place by the end of next week and ahead of chancellor Jeremy Hunt's crucial budget on 31 October. This will be the country's third PM of the year.
"Given the unprecedented events involving British politics in recent weeks, investors are hoping for less volatility and more stability in both the government and on the markets," said Russ Mould, investment director at AJ Bell. "Even though there is some sense of peace in the markets now, this could all change next week when we have a clearer idea of who is in the running for No10 and how each candidate might reshape the country’s policies to avoid economic shocks."
Britain's economy is battling on all fronts, with retail sales coming in lower than expected for September and as debt interest payment drove government borrowing to £20bn ($22.37bn) last month.
High streets and supermarkets witnessed another sales slump in September as shops were knocked by cost of living concerns and closures for the Queen Elizabeth II's state funeral.
UK retail sales volumes declined by 1.4% last month, according to the Office for National Statistics. That was above the 0.5% economists had expected. Sales declined 1.7% in August.
Retail sales volumes fell by 1.4% in September, following August’s 1.7% fall.
Retail is now 1.3% below its pre #COVID19 level https://t.co/FX2DEHxzN3 pic.twitter.com/2S3rlV53Ga
— Office for National Statistics (ONS) (@ONS) October 21, 2022
Across the Atlantic, US indices gave up gains at the open, then recovered, but inflation remains in focus as investors continue to be concerned about the prospects for growth and earnings against the backdrop of higher interest rates.
On Wall Street, the S&P 500 (^GSPC) was up 0.2%, the tech-heavy Nasdaq (^IXIC) dipped 0.1%, while the Dow Jones (^DJI) added 0.6% at Europe's close.
Read more: Chancellor Jeremy Hunt will not run to be the next prime minister
Richard Hunter, head of markets at Interactive Investor, said: "Further comments from the Fed showed no signs of an attention to moderate, with rises of 0.75% expected for November and December, and the additional possibility that such rises may spill over into next year also.
"The latest jobless claims figure was helpful to their cause, showing continuing tightness in the labour market and some wage inflation which will also need to be tackled."
Stocks in Asia finished the session mixed. In Tokyo the Nikkei (^N225) was down 0.4%, while the Hang Seng (^HSI) fell 0.1% in Hong Kong and the Shanghai Composite (000001.SS) gained 0.1% in mainland China.