UK Market Rises Due to Global Factors Political Uncertainty
On Wednesday morning, as London’s financial markets reopened after the resignations of senior ministers put Prime Minister Boris Johnson’s tenure in doubt, Britain’s benchmark stock market index jumped more than 2%. , along with increases in other European markets.
The pound rose slightly against the US dollar on Wednesday morning, a small bounce from a 1.5% drop a day earlier, as investors sought the safety of the US currency amid The risk of recession is increasing worldwide.
As for financial markets, the global trend of rising inflation, worsening energy security and a weakening growth outlook have created an unexpected upheaval in UK politics. Jordan Rochester, strategist at Nomura bank, wrote in a report Tuesday night that on the short-term side, there is no clear way for traders to take advantage of this news. More information is needed on whether Mr Johnson will stay in power and the plans of ministers to replace him. Mr Rochester writes that the recent drop in the pound is due to economic factors.
On Tuesday, Rishi Sunak cited the economy in his explanation of why he resigned as prime minister by the Exchequer, Britain’s top finance official. He is expected to give a speech next week with Mr Johnson about their plan to support the economy through a period of high inflation and slowing economic growth, and it appears the difference in Their proposals are too large to be violated.
“It is clear to me that our approach is fundamentally different,” Sunak wrote in his resignation letter to the prime minister.
Just hours later, Mr Johnson announced Mr. Sunak’s replacement as prime minister: Nadhim Zahawi, who had been education secretary. Mr. Zahawi was initially brought into the cabinet only last year, having previously overseen the rollout of a coronavirus vaccine.
On Wednesday morning, Mr. Zahawi said, “I have to rebuild the economy and move to growth in the economy, that’s my focus.”
Britain faces a major challenge as the UK’s economic outlook has turned sour. Inflation at the highest level in 4 decades and is not expected to peak until it rises above 10 percent in the fall, when limits on household gas and electricity bills will be reset higher. Households are facing the most squeezed income levels in generations, and the pain has become acute as people try to spend less, while credit cards and personal debt pile up. other is increasing.
The Bank of England raised interest rates to the highest level since 2009 and said more is likely to come in the fight against rising inflation, even as economic growth prospects deteriorate. Enterprises are facing rapidly rising costs, with many having difficulty hiring since Brexit and the pandemic have reduced available labor.
Mr. Sunak declared billions of pounds in additional spending in May to help people with the rising cost of living, partly funded by income taxes from oil and gas companies. But he expressed reservations about the government being able to use spending to ease economic hardship and support business investment and reduce taxes to increase productivity.
Differences in policy approaches and succession of economic shocks have hindered the government’s efforts to pursue a consistent economic strategy. Late last year, Mr Johnson announced that he could build a High growth, high salary economy, and now he is warning against large wage increases that could exacerbate inflation.
When wages fell far below inflation, workers called strikes set England up for a summer of unsettled labor. Recently, Worker training and criminal defense attorneys have left their jobs, and health care workers, teachers and postal workers are among those threatening to strike in the coming months.