Liz Truss, the UK’s prime minister and leader of the Conservative Party, has resigned after 45 days in office, becoming the country’s shortest-serving leader in history.
In a speech outside Downing Street, Truss said: “I recognise though, given the situation, I cannot deliver the mandate on which I was elected by the Conservative Party.”
AJ Bell financial analyst Danni Hewson says: “To use a phrase that has no doubt been exhausted in the past few weeks, markets don’t like uncertainty. And losing another prime minister in the midst of a cost-of-living crisis is far from ideal. But Liz Truss’ credibility with markets was shattered when her former chancellor unveiled the mini-budget which effectively lit the touch paper on an explosive period for politics and demonstrated the importance of taking markets with you when it comes to fiscal policy.
“Sterling received a boost against the dollar on the speculation that resignation was imminent and the yield on 30-year gilts was nudged down, but the reality that number 10 is once again in need of a new inhabitant has led to minute-by-minute fluctuations.
“Now the ‘will she, won’t she’ part has been taken out of investor equations the FTSE 250 has rallied and with the prosect of a firm hand on the tiller, markets are now anticipating the Bank of England won’t have to raise rates as far or as fast when they meet next month.
“There are big questions to be answered and they need to be answered quickly. The Conservative Party is promising a quick appointment within days, crucially ahead of the fiscal event scheduled for Halloween.
“And for markets that’s really the key issue – that the independent economic health check needs to be published and policy needs to stand. There can be no more vacillating, dithering or U-turns.
“But can the party really rally behind one person? Can there be a unifying candidate who can heal political wounds and restore confidence that the important business of running the country can actually be put first ahead of political power plays? There are naturally many calls now for a general election, and time will tell whether that can be side stepped by the incoming prime minister.
“Volatility which has been a hallmark of global markets this year is most definitely here to stay in UK markets, at least for now. Time is short and credibility is on the line, but it is ordinary people’s finances that should be the priority.”
Close Brothers Asset Management chief investment officer Robert Alster says: “The impact on markets of Liz Truss’ resignation over the short term will all depend on the fiscal stance of her successor, who they appoint as Chancellor, and how both these events play out in the mini budget at the end of the month. Markets are looking for a more balanced budget and more political stability for the UK, and sterling is rising in the hope that the new Prime Minister will provide both.”
IG Group chief market analyst Chris Beauchamp says: “An initial bounce in the pound has begun to fade, as the implications of yet another period of uncertainty sink in. But given how quick the change is expected, and with the chancellor likely to stay in place, we should expect market tensions to calm. In all likelihood Rishi is ready to step in, and with Hunt in alignment with him we can expect a very different approach, but one more likely to please markets.”