The Ftse 100 slipped after Sir Keir Starmer announced his resignation, with investors reacting to the latest political uncertainty in Westminster.
The UK’s blue-chip index fell from 10,360.29 at 9.30am to 10,351.12 by 10:00am.
The modest decline came as markets assessed the implications of the Prime Minister’s departure and the prospect of a Labour leadership contest.
Andy Burnham has emerged as the frontrunner to replace Sir Keir, with investors closely watching what a change in leadership could mean for government spending, borrowing and the wider economy.
UK stocks edged lower in early trading on Monday as investors monitored mounting political uncertainty in Westminster ahead of Sir Keir Starmer’s resignation announcement.
The Ftse 100 was down 0.07 per cent, giving up gains made earlier in the session. Sterling dropped 0.3 per cent to 1.319 US dollars in morning trading and was down 0.1 per cent against the euro at 1.152.
The pound has fallen by around three per cent against the dollar since February, with investors weighing a combination of political uncertainty and concerns about the UK’s economic outlook.
Elsewhere in Europe, Germany’s DAX rose 0.09 per cent, while France’s CAC 40 fell by the same amount.
The decline came despite signs of progress in talks between the US and Iran over the Strait of Hormuz, which helped ease some geopolitical concerns.
Instead, investors appeared focused on developments in Westminster following Sir Keir’s departure and the prospect of a Labour leadership contest.
Andy Burnham has emerged as the frontrunner to succeed the outgoing Prime Minister after his victory in the Makerfield by-election on June 19.
The Prime Minister annoucned his resignation two years after his landslide election
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PA
Mr Burnham captured approximately 55 per cent of the vote, securing both a parliamentary seat and what amounts to a clear mandate to mount a leadership challenge.
Sir Keir had previously insisted he would not “walk away” from the job, but he announced his resignation on Monday morning following mounting political pressure.
US President Donald Trump weighed into the political turmoil over the weekend, writing on Truth Social that Starmer “will resign as Prime Minister of The United Kingdom”.
He claimed the departure would be driven by what he described as failures on “immigration and energy”.
Mr Trump waded into the political drama over the weekend, declaring on Truth Social that Starmer “will resign as Prime Minister of The United Kingdom.”
The US President attributed the anticipated departure to what he described as failures on “immigration and energy.”
Mohit Kumar, an analyst at Jefferies, suggested that a resignation “should make the transition smooth” for Mr Burnham.
Ftse slips after PM announces resignation
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The intervention from Washington has compounded uncertainty for investors already grappling with questions over the government’s direction.
Markets now face the possibility of a drawn-out leadership contest, which could complicate the administration’s fiscal strategy and growth plans at a particularly sensitive juncture.
The cost of UK government borrowing eased slightly on Monday morning, with the yield on 10-year government bonds falling from 4.84 per cent to 4.82 per cent.
The modest improvement came after Iranian and US negotiators reported progress in peace talks, helping to calm financial markets.
However, borrowing costs remain higher than they were before Mr Burnham’s by-election victory was confirmed, when the 10-year gilt yield stood at 4.76 per cent.
UK borrowing costs have also fallen by less than those seen in France, Germany, Italy and Spain. On Friday, Britain’s borrowing costs rose faster than those of any other major European economy amid concerns that higher government spending could add to the country’s near-£3trillion debt burden.
Until the index breaks decisively higher, rangebound trading amplified by political uncertainty appears likely to continue.