Starmer’s Labour haemorrhaged support in areas reporting overnight, with results still rolling in on Friday

International News via Reuters:

The pound and UK government bonds climbed on Friday after British Prime Minister Sir Keir Starmer said he would not resign despite bruising losses for his ruling Labour Party in local elections.

Starmer’s Labour haemorrhaged support in areas reporting overnight, with results still rolling in on Friday. The populist Reform UK party of Brexit campaigner Nigel Farage was so far the main winner, gaining more than 350 council seats in England.

Investors have been concerned that should Starmer be forced out of office, a new, left-leaning Labour leader could boost public borrowing.

The pound was last up 0.5% at $1.362, and rose 0.1% against the euro.

Meanwhile, Britain’s benchmark 10-year Gilt yield, a proxy for government borrowing costs, was outperforming global markets and had fallen 5 basis points. Yields move inversely to prices.

It was too early to gauge the full impact of the results, analysts and investors said, but Starmer vowing to stay on had reassured markets somewhat.

“I think it’s an initial relief rally,” said Lloyd Harris, head of fixed income at Premier Miton Investors. “But ultimately I think the fireworks are still to come.”

“I would say it’s a small net positive for Gilts that actually the Greens haven’t done better,” Harris said, adding that it reduced the chances that the left-wing party, which would likely increase spending, could win a general election.

Britain’s FTSE 100 stock index fell 0.5% as oil prices rose on concerns about the fragile Iran ceasefire, but slightly outperformed broader European equity markets.

TRADERS AWAIT LEADERSHIP CHALLENGES

UK markets have been jittery in the run-up to the local elections as some investors think the likely replacements for Starmer would move Labour leftwards and increase spending, adding to the pressure on government bonds.

“We don’t think any of the alternatives to Starmer are likely to be sterling positive,” said Nick Rees, head of macro research at Monex Europe.

“Angela Rayner, clearly from the left of the party, would scare bond markets, as likely would Andy Burnham,” he added, naming two Labour politicians often cited as potential challengers to Starmer.

UK 10-year bond yields have traded at 18-year highs in recent weeks, while 30-year yields rose to their highest since 1998 earlier this week.

Lale Akoner, global market analyst at eToro, said gilts could sell off again if credible leadership challenges materialise.

“The market issue is whether this threatens fiscal credibility,” she said. “So far, it does not. Leadership is weakened, but not clearly at risk of being forced out.”

The U.S. dollar edged down on Friday against a range of currencies as markets kept an eye on the Middle East. U.S. President Donald Trump told reporters the ceasefire with Iran was still in effect.

Reporting by Stefano Rebaudo and Harry Robertson; additional reporting by Canan Sevgili; editing by Amanda Cooper, Susan Fenton and Toby Chopra

The blue-chip FTSE 100 index closed 1.6% lower at 10,276.95 points after surging more than 2% in the previous session

International News via Reuters:

Britain’s FTSE 100 dropped on Thursday, as losses in oil majors Shell and BP and defence firms weighed, while Britons headed to the polls in local and regional elections.

The blue-chip FTSE 100 index closed 1.6% lower at 10,276.95 points after surging more than 2% in the previous session. The midcap FTSE 250 gained 0.2%.

• The elections could deal a huge blow to Prime Minister Keir Starmer’s Labour Party, renewing scepticism about his ability to govern. They could also signal the beginning of the end of Britain’s traditional two-party system.

• A recent survey showed that in April, British builders saw one of the biggest month-on-month jumps in cost inflation.

• The pound <GBP=> rose against the dollar on hopes that an end to the U.S.-Iran conflict was near, pressuring multinational firms that earn most of their revenue overseas.

• With earnings season in full swing, markets are assessing consumer demand and any economic impact from the Middle East conflict.

• Shares of oil major Shell dropped 2.9% despite reporting its highest quarterly profit in two years and raising its dividend. Rival BP fell 2.6%, as oil’s slide below $100 weighed on its stock. [O/R]

• Shares of BAE Systems were down 4.7%, among the biggest drags on the FTSE 100, after the defence firm maintained its full-year outlook.

• InterContinental Hotels Group rose 1.5% after topping quarterly room revenue estimates as its U.S. business rebounded.

• Autotrader Group gained 4.1% after a source told Reuters that activist investor Palliser Capital had built an up to 2% stake in the company.

• Helios Towers jumped 14.3%, lifting the mid-cap index, after the mobile tower operator raised its annual profit forecast.

• RELX dropped 6.2% after Morgan Stanley downgraded its rating on the information group to “equal-weight” from “overweight”. Shares of the company were also trading ex-dividend on Thursday.

Reporting by Medha Singh and Shashwat Chauhan in Bengaluru; Editing by Diti Pujara and Alex Richardson