The pound has now risen back over the $1.20 mark, up almost a cent today.
That’s still only its highest level since Tuesday, though…
Chris Beauchamp, Chief Market Analyst at IG Group, says sterling’s outlook is still ‘bleak’:
The pound has been looking for any excuse to bounce against the dollar following its drubbing lately.
Boris’ decision to go removes at least some of the uncertainty, and means that a snap election is off the cards. Longer-term the outlook is still bleak for the pound, so this bounce is unlikely to last
Guy Foster, chief strategist at wealth manager Brewin Dolphin, agrees that the impending departure of Boris Johnson will have a limited impact on London’s stock market.
“Although this Westminster event may seem momentous, it has very little impact in the financial markets. The impact on treehouse builders, Westminster-based wine merchants and flat renovators is not discernible in the performance of the FTSE 100.
The prime minister’s impending departure, by hook or by crook, was very much anticipated. Furthermore it is not obviously going to lead to a dramatic change in policy.
The most one could say is that a new Conservative prime minister would likely have a fiscally conservative approach than the outgoing one, but we don’t know to what extent.
Globally operating companies will be largely completely immune to this news, Foster adds:
For more domestically focussed companies it’s not clear whether there will be any material impact.
Movements in the pound have been marginal and UK government bonds are outperforming those in other European states but gas supplies and the war in Ukraine remains the most critical determinant of relative European bond performance.”
A surge in mining companies, rather than Boris Johnson’s looming resignation, is the main factor pushing up shares in London.
Glencore (+7.5%), Anglo American (+7.4%) and Antofagasta (+5.6%) are leading the FTSE 100 risers, followed by oil giant BP (+5.6%).
They’ve lifted the blue-chip FTSE 100 index up nearly 1.3%, or 90 points, to 7196, as it claws back losses during Tuesday’s slide.
Reuters says hopes of fresh stimulus measure in China are lifting markets:
Bloomberg reported, citing unnamed sources, that China’s Ministry of Finance was considering allowing local governments to sell 1.5 trillion yuan (£186bn) of bonds in the second half, an acceleration of infrastructure funding aimed at shoring up the economy.
House prices in the UK rose at the fastest annual rate in 18 years last month as demand – especially for larger homes – continued to outstrip the number of properties on the market.
Halifax, one of the country’s biggest mortgage lenders and part of Lloyds Banking Group, said the market “defied any expectations of a slowdown”, with prices rising year on year in June by 13%, the highest since late 2004.
Prices rose 1.8% compared with May, which was the biggest monthly rise since early 2007.
A typical property now costs £294,845, another record high, as prices continue to rise despite the cost of living crisis. House prices have risen every month over the past year and have climbed by 6.8% so far this year, or £18,849 in cash terms.
Russell Galley, the managing director of Halifax, said:
“The supply-demand imbalance continues to be the reason house prices are rising so sharply. Demand is still strong – though activity levels have slowed to be in line with pre-Covid averages – while the stock of available properties for sale remains extremely low.
And we have reaction earlier in the blog, from here.
UK companies have lifted their expectations for pay rises, according to a Bank of England survey.
British employers’ expectations for pay growth in the coming 12 months increased to 5.1% from 4.8% in May.
The survey also found that recruitment difficulties are still widespread, with 88% of firms finding it harder to recruit new employees compared to normal.
Two-thirds reported that it was ‘much harder’, which was the highest since the question was first asked in October 2021.
Overall levels of business uncertainty edged up in June, with Brexit overtaking Covid as a leading worry for businesses.
The BoE says:
For the first time since the onset of the pandemic, Brexit was a larger source of uncertainty for panel members than Covid. 25% of respondents cited Brexit as a top-three source of uncertainty in June, up 5 percentage points on May.
Yesterday, BoE chief economist Huw Pill pledged the central bank would “deliver inflation back to its 2% target”.
Although Johnson has agreed to step down as Conservative leader, he wants to stay on as PM until the autumn when a new Tory leader is in place.
That’s not guaranteed — two ex-ministers have told the Guardian they think it not possible for Johnson to stay till then, so a caretaker PM is needed.
Matthew Ryan, head of market strategy at global financial services firm Ebury, says that hopes of avoiding “an ugly exit from Downing Street” did give the pound a small lift:
So far, GBP has taken the political uncertainty in its stride, and actually posted modest gains this morning on the headlines that Johnson was planning to resign.
Markets were already fully expecting him to go, but news of an imminent resignation, and the avoidance of a likely messy and potentially ugly removal from office, has given the pound a modest leg up.
But until a clear favourite to replace Johnson emerges, the City won’t have a clear understanding of potential policy implications.
And even then, sterling’s value will be driven more by UK recession concerns and Bank of England monetary policy, Ryan adds.
“The resignation of Boris Johnson as UK PM will breath a sigh of relief for UK investors as it curtails the uncertainty of a government in name only.
We saw some instant buying in GBP [the pound] which gained against the Euro as investors reacted to the news of his impending resignation.
Sterling is up 0.25% against the euro this morning to its highest since mid-June at €1.174, as well as gaining against the dollar.
Koudmani adds, though, that Johnson’s successor faces a massive challenge:
Make no mistake however, the GBP remains severely weak due to the dire state of the UK economy which is underperforming its peers, likely to enter into a recession while the Bank of England refuses to hike interest rates aggressively to deal with the escalating inflation.
The new Prime Minister – whoever that is – has a massive job on their hands.”
Sterling has rallied a little on reports that Boris Johnson is to resign.
The pound has risen to $1.1980, up half a cent this session, as the news breaks that Johnson is expected to resign today.
His office says he will make a statement to the country.
This follows a further flurry of ministerial resignations this morning (including Brandon Lewis, Northern Ireland secretary), and the blow of newly appointed chancellor Nadhim Zahawi called on Johnson to quit.
But that still leaves sterling near its lowest level since the pandemic, dragged down by recessions concerns:
The blue-chip FTSE 100 index is having a solid morning too, up 1.2% so far.
Naeem Aslam of Avatrade says:
Sterling has moved higher on the back of the news that Broexit is happening—Boris is going to leave the office. There is no doubt that Boris Johnson has failed the public on many occasions and the fact that he will be leaving is helping the currency and FTSE 100 for now.
However, political uncertainty has increased as a large number of political cards will come into play where the new Prime Minister may try to persuade public by adopting more loose fiscal policy which could make the BOE’s job even more difficult which is trying to bring it down.
Andrew Sparrow’s Politics Liveblog has all the action on another historic day in Westminster:
Jet2 also predicted that holiday prices could be squeezed in future, as travellers will have less money to spend on trips:
Inflationary pressures coupled with the uncertain UK economic outlook for consumers, lead us to conclude that in the medium term prices are likely to come under some pressure.
However, it agues it has “the right product for these tougher times”.
The end-to-end package holiday is a higher yielding, resilient and popular product in difficult economic times and the Mediterranean and Canary Islands are evergreen destinations where people absolutely want to go.
The control of our own seat supply and our frequency of flying, allow us to offer truly variable duration holidays, critical in allowing our Customers the ability to flex their holiday arrangements to suit their individual budgets.
Airline Jet2 has launched a stinging attack on British airports, saying they had been ‘woefully ill-prepared’ for the return to passengers this summer.
Philip Meeson, Jet2’s executive chairman, said airports’ failure to recruit sufficient staff ahead of the rebound in demand was “inexcusable”, leading to misery for customers.
Meeson pinned the blame firmly on the airports, and their suppliers, for this summer’s travel chaos, which has led to many thousands of flight cancellations.
Meeson also heavily criticised a number of key suppliers for poor planning, including on-board caterers and providers of passenger-mobility services.
He told the City that:
Broadly, most of our 10 UK Base Airports have been woefully ill-prepared and poorly resourced for the volume of customers they could reasonably expect, as have other suppliers, such as Onboard Caterers and providers of Airport PRM (Passengers with Reduced Mobility) services.
Inexcusable, bearing in mind our flights have been on sale for many months and our load factors are quite normal.
In its preliminary results for the last year, Meeson explains:
Theirs and the Ground Handling suppliers’ often atrocious customer service, long queues for Security Search, lack of Staff and congestion in Baggage Handling Areas, and the consequent airport congestion, together with the frequent lack of onboard catering supplies, have each contributed to a very much poorer experience at the start and finish of our Customers’ holidays than they were entitled to expect.
Inevitably, these customer-facing challenges have put extra pressure on our Colleagues, both in the UK, onboard our aircraft and in our holiday destinations.
This difficult return to normal operations has occurred simply because of the lack of planning, preparedness and unwillingness to invest by many Airports and associated Suppliers.