Sterling Steadies and FTSE 100 Rises as Starmer Resigns and US-Iran Talks Advance
The pound strengthened and London equities climbed on Monday after Sir Keir Starmer confirmed his resignation as Prime Minister, with markets focusing swiftly on the question of who will succeed him — and, crucially, who will take charge of the Treasury.
Markets React Calmly to Political Upheaval
The FTSE 100 closed up 74.58 points, or 0.7%, at 10,437.85, while the pound traded at 1.3254 dollars on Monday afternoon, up from 1.3227 dollars on Friday. Against the euro, sterling firmed to 1.1587 from 1.1532.
The yield on UK 10-year gilts eased slightly to 4.81%, down from 4.84% at the same point on Friday — a modest but welcome signal that bond markets are not alarmed by the change in leadership.
The FTSE 250 ended marginally lower, down 3.72 points at 23,197.01, while the AIM All-Share fell 1.56 points, or 0.2%, to 794.27.
Starmer Out After Two Years; Burnham the Frontrunner
Sir Keir, visibly emotional, conceded he had lost the confidence of his parliamentary party just two years after leading Labour to a landslide victory in the 2024 general election. He has asked the party’s National Executive Committee to set a timetable for a leadership contest, with nominations opening on July 9 and closing on July 16.
Andy Burnham, the Greater Manchester Mayor who won last week’s Makerfield by-election, is the clear frontrunner to become Britain’s seventh prime minister in a decade. If he goes unchallenged, he could take office as early as July 17 or 18.
Health Secretary Wes Streeting ruled himself out of the leadership race, prompting widespread speculation that he may be positioned to become the next Chancellor of the Exchequer.
Markets Eye the Next Chancellor
Shreyas Gopal, analyst at Deutsche Bank Research, noted that the identity of the incoming chancellor is now the primary concern for financial markets. He described Streeting as among the more market-friendly potential candidates for the role.
The relative stability of sterling and gilts suggests investors are, for now, treating the transition as orderly rather than destabilising — though uncertainty over fiscal policy will persist until cabinet appointments are confirmed.
US-Iran Talks Lift Sentiment; Oil Falls
A secondary driver of Monday’s positive mood was progress in US-Iran nuclear negotiations. Senior Iranian envoys departed talks in Switzerland following a marathon session, with US Vice-President JD Vance declaring that a “very good foundation” had been laid for a final deal.
Deutsche Bank’s Jim Reid noted that developments in the Middle East had turned “more constructive,” adding that increased oil flows through the Strait of Hormuz were “helping to calm markets.”
Brent crude for August delivery fell to 77.38 dollars a barrel, down sharply from 80.21 dollars on Friday, easing inflationary pressures on energy-dependent economies.
Banks Lead London Gains
Financial stocks were the standout performers in London. NatWest rose 4.0%, while both Lloyds and Barclays gained 3.9%. The moves reflect broader optimism around the domestic economic outlook and the prospect of a stable, centrist successor government.
Babcock Falls on Guidance Disappointment
Babcock International was the FTSE 100’s sharpest faller, dropping 5.9% after the defence contractor declined to raise guidance alongside its full-year results. The figures were weighed down by a previously disclosed £140 million charge related to the Type 31 frigate programme.
Russ Mould of AJ Bell observed that elevated expectations around defence spending had left some investors vulnerable to disappointment. David Perry at JPMorgan flagged that a change in prime minister could delay near-term contract awards, though he maintained that Babcock remained well-placed to win “numerous international contracts” over the financial year.
easyJet Rebuffs Castlelake Advances
easyJet rose 2.8% on the FTSE 250 after disclosing it had rejected three successive takeover bids from Minneapolis-based asset manager Castlelake. The final offer, at 625 pence per share, valued the Luton-based carrier at approximately £4.74 billion. EasyJet dismissed the approach as an “opportunistic attempt to acquire easyJet on the cheap.”
Ocado Slides on CEO Succession Reports
Ocado fell 5.9% after Sky News reported that the Hertfordshire-based grocery technology group is preparing to appoint a successor to long-serving chief executive Tim Steiner. The company acknowledged that it “continually engages in long-term succession planning,” but offered no further detail.
IP Group Receives Takeover Approach
Science and technology investor IP Group edged up 0.5% after Railways Pension Trustee Co (Railpen), which holds an 18.4% stake, disclosed a takeover approach valuing the firm at 69.7 pence per share. Railpen argued that IP Group “would be best served in the private markets,” citing a challenging experience as a listed company.
Global Markets and Commodities
European markets were mixed: the CAC 40 in Paris fell 0.3%, while the DAX 40 in Frankfurt gained 0.6%. In New York, the Dow Jones rose 0.3%, while the S&P 500 slipped 0.3% and the Nasdaq Composite fell 1.1%. US markets had been closed on Friday for the Juneteenth public holiday.
Gold continued its ascent, trading at 4,184.04 dollars an ounce, up from 4,152.32 dollars on Friday.