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FTSE closes on a bounce as Rishi Sunak enters race to become UK's next prime minister

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·4-min read
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The FTSE 100 closed in the green as Rishi Sunak entered the race to become UK's next prime minister. Photo: Aaron Chown/PA
The FTSE 100 closed in the green as Rishi Sunak entered the race to become UK's next prime minister. Photo: Aaron Chown/PA

European stock markets were in the green on Friday after Rishi Sunak launched a bid to replace Boris Johnson as the next leader of the Conservative Party and UK prime minister.

The FTSE 100 (^FTSE) closed 0.1% higher in London, while the CAC (^FCHI) rose 0.4% in Paris, and the Frankfurt DAX (^GDAXI) was 1.3% higher.

The former chancellor published a three-minute video declaring his candidacy on Friday afternoon. He is widely seen by Tory MPs as one of the front-runners.

Posting a video on Twitter, alongside a #Ready4Rishi hashtag, he wrote: "I'm standing to be the next leader of the Conservative Party and your prime minister.

"Let's restore trust, rebuild the economy and reunite the economy."

He added: "Our country faces huge challenges, the most serious for a generation. And the decisions we make today will decide whether the next generation of British people will also have the chance of a better future."

Sunak resigned as chancellor of the exchequer on Tuesday, shortly after Sajid Javid announced he was quitting as health secretary. This triggered an avalanche of ministerial resignations that ultimately led to Boris Johnson resigning as prime minister on Thursday.

"It’s been a chaotic week for politics and a rollercoaster ride for investors as markets experienced yet more wild swings,” Russ Mould, investment director at AJ Bell, said.

It comes as Germany started an unofficial process of rationing energy amid gas cuts from Russia.

Germany's economy minister Robert Habeck has placed the country in the second phase of its three-stage emergency gas plan, warning: "We have to be prepared for the situation to become critical.”

Vonovia, Germany’s largest residential landlord, said it would lower the temperature of its tenants’ gas central heating to 17 degrees between 11pm and 6am, according to the Financial Times.

It comes amid rising fears Putin's gas cuts could lead to blackouts this winter. Meanwhile, the crucial Nord Stream pipeline to Germany is set to shut down for planned maintenance next week, with some fearing it will never reopen.

Natural gas prices are on course for the longest stretch of weekly gains this year.

Watch: Why are gas prices rising?

Across the pond, US benchmarks reversed losses after robust non-farm payrolls data sparked concerns about further interest rate rises and a recession.

Wall Street’s S&P 500 (^GSPC) gained 9.29 points, or 0.2%, to 3911.91. The tech-heavy Nasdaq (^IXIC) rose 0.4%, while the Dow Jones (^DJI) added 0.2% at London's close.

Employers in America added more jobs last month than expected, while the unemployment rate held near a five-year low in a sign the labour market is holding up better than forecast.

Non-farm payrolls rose 372,000 in June following a revised 384,000 in May, according to the Labor Department. The unemployment rate held at 3.6% and average hourly earnings rose 0.3%.

Economists predicted the non-farm payroll to rise by 268,000, down on the 390,000 US jobs created in May.

Read more: What Boris Johnson's resignation means for markets

"The latest US jobs report helped alleviate fears that the widely anticipated recession could begin to hit business investment and hiring decisions," said Joshua Mahony, senior market analyst at online trading platform IG.

"Nevertheless, we have seen some weakness for US markets as better-than-expected payrolls, and stable unemployment/wages strengthen the case for a 75 basis-point hike in three-weeks’ time."

Stocks in Asia were mixed overnight, with the Nikkei (^N225) climbing 0.1% in Tokyo while the Hang Seng (^HSI) rose almost 0.3% in Hong Kong, and the Shanghai Composite (000001.SS) fell more than 0.2%.

It came after Japan's prime minister Fumio Kishida announced that former leader Shinzo Abe was in a “very grave condition” after being shot during a campaign event for the ruling Liberal Democratic Party in the city of Nara in western Japan. It was later confirmed that he had died from the gunshot.

Read more: Pound falls against the dollar over UK economy fears

According to local media, a suspect has been arrested following the incident and remains in custody.

Elsewhere, an announcement that the government will allow local authorities to sell 1.5tn yuan of bonds to support infrastructure spending was warmly received by investors looking for signs of support for the beleaguered Chinese economy.

Watch: Japanese PM Fumio Kishida calls shooting 'barbaric'

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