British Stocks Unchanged As Truss Becomes New PM

UK’s FTSE 100 was unchanged after opening lower on Monday as the Conservative Party announced Liz Truss as Britain’s new prime minister as expected, while the British pound remained lower against the dollar.

The benchmark FTSE 100 slid 0.5%, while the domestically oriented FTSE 250 shed 1.3% at 1212 GMT.

Foreign minister Liz Truss won the ruling Conservative Party’s leadership contest with 57.4% of the vote, triggering the start of a handover from Boris Johnson, who was forced to announce his resignation in July after months of scandal saw support for his administration drain away.

“Truss winning the elections did not surprise the markets at all, it was pretty much priced in,” said Pooja Kumra, senior European & UK rates strategist at TD Securities.

“The markets are hanging on what actually Truss would do in terms of fiscal policy and tax cuts that would solve the cost of living crisis which is determining the price impact on UK’s household and the consumer sector.”

Also weighing on the markets, European stocks slid after Russia extended a halt to flows on the Nord Stream 1 gas pipeline to Europe, adding to fears of winter fuel shortages and the impact on growth. [.EU]

A survey showed Britain’s economy ended August on a much weaker footing than previously thought as overall business activity contracted for the first time since February 2021 in a clear signal of recession.

Truss is poised to take charge of Britain when it is facing a cost of living crisis, industrial unrest and a looming recession.

Some investors are alarmed that tax cuts promised by Truss could aggravate Britain’s inflation problem, speeding up the Bank of England’s interest rate hikes and worsening a recession that the BoE expects to start this year.

The rate-sensitive banking sector declined 1.3%.

The pound edged lower after the announcement and remained close to its pandemic trough.

Oil majors Shell and BP gained 1.2% and 1.7% on firm crude oil prices as investors eyed possible moves by OPEC+ producers to cut output and support prices at a meeting later in the day. [O/R]