UK stocks rose on Monday as investors treated Prime Minister Keir Starmer’s planned resignation as a manageable political transition rather than an immediate market shock.
The FTSE 100 ended higher, helped by strong gains in major banks, while the FTSE 250 finished flat.
Starmer said he will resign once a successor has been chosen. Nominations for the Labour leadership are due to open on July 9, with a new leader expected before Parliament returns in September.
The main market question is now fiscal policy. Investors will be watching whether the next leader signals higher spending, tax changes or a more cautious approach to borrowing. UK gilt yields have already been under pressure from concerns about debt-funded spending, so any credible commitment to fiscal control could help support sentiment towards sterling, gilts and domestically exposed shares.
Sterling edged higher against both the dollar and the euro after the announcement, while gilt yields were broadly stable to slightly lower. Bank shares led the market higher. NatWest, Barclays and Lloyds all rose by more than 3%, giving the FTSE 100 important support.
Rate-sensitive household goods and home construction shares also recovered as gilt yields eased. That helped improve sentiment towards parts of the market more closely linked to the UK economy. A more stable bond market could remain useful for these sectors if the leadership transition continues without a sharp shift in fiscal expectations.
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