FTSE 100 LIVE: Stocks rise while pound and UK bonds recover as Starmer backs Reeves
The FTSE 100 ( ^FTSE ) and European stocks were higher on Thursday while the value of the pound also recovered as prime minister Keir Starmer assured traders that chancellor Rachel Reeves will remain in her role “into the next election”.
It came after government borrowing costs surged after the chancellor was seen shedding tears in the Commons on Wednesday while the prime minister failed to back her when questioned at the despatch box.
The 10-year gilt yield, a benchmark for the cost of servicing the national debt, surged by nearly 16 basis points to 4.61%, while 30-year yields climbed 19 basis points to 5.42%.
Meanwhile, sterling fell by a cent against the US dollar, sliding from $1.3745 to $1.3636, making it the worst-performing major currency in the world at the time, on the back of the news.
Christian Kopf, head of fixed income at asset manager Union Investment Group, told BBC Radio 4’s Today programme: “Often we see jitters in the bond market which is caused by external events but yesterday it was different.
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“It was clearly caused by Prime Minister’s Questions and by domestic events in the UK and the movement was very swift and very stark.
“It’s about the future of the fiscal rule in the UK. Chancellor Reeves stands for that fiscal rule. Investors were growing concerned about the prospect of very high fiscal deficits that are no longer compliant with the fiscal rule and that would then give rise to higher yields and a weaker pound sterling.
“So people are really concerned about the consistency of economic policymaking in the UK.”
Starmer has since reassured traders of Reeves' position. "She and I work together, we think together. In the past, there have been examples — I won’t give any specific — of chancellors and prime ministers who weren’t in lockstep. We’re in lockstep," he said.
The yield on UK 30-year bonds has dipped by 0.8% in early trading, to 5.361%. UK 10-year bond yields have also dipped by around three basis points, to 4.55% from 4.58% last night.
These moves suggests the bond markets are relieved that the PM is standing by Reeves, easing concerns that a new chancellor might be less committed to the current fiscal rules.
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