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FTSE 100 performs well despite PM’s leadership woes

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06/06/2022
The FTSE 100 and sterling performed well this morning despite Boris Johnson facing a confidence vote on his leadership of the Conservative party.

The Prime Minister, Boris Johnson, will this evening face a ballot where Conservative MPs will vote whether they have confidence in his leadership.

Despite the announcement this morning by the 1922 Committee which confirmed that the required threshold of 54 Conservative MPs (15%) have written to express no-confidence in Johnson, markets are “completely unphased”.

The FTSE 100 index was up 29.49 points, or 0.4%, at 7,471.88 at midday in London. The mid-cap FTSE 250 index was up 50.86 points, or 0.3%, at 21,057.42.

Meanwhile, the pound was up 0.48% against the dollar at $1.2550 and up 0.53% against the euro at €1.1706.

Danni Hewson, financial analyst at AJ Bell, said: “Markets are completely unphased by the political shenanigans unfolding at Westminster. There’s a vast ocean of blue water between a vote of no-confidence being called and a new Prime Minister picking out wallpaper for number 10.

“And even if Boris Johnson does call in the movers, the anticipation is that Conservative fiscal policy wouldn’t change materially which is why markets are turning their attention elsewhere. An upbeat US futures market is leading the way and UK markets are more than happy to play catch up after their long bank holiday.

“The potential of an easing of US tariffs on Chinese goods, a robust oil price and the potential of rate rises in Europe are all setting the tone for the start of the week.”

Shane O’Neill, head of interest rate trading at Validus Risk Management, said: “Despite news that Boris Johnson faces a no-confidence vote, GBP is up against both the dollar and the euro – the FTSE 100 and UK rates have also moved higher on the open as traders come back to work after the long weekend.

“Though it is tempting to see this as an increase in political uncertainty, if Johnson survives there can’t be another vote for a year – potentially providing some stability to Whitehall.”

He added that whether or not Johnson survives, “the whole scene is likely to play second fiddle to the more pressing market matters of sticky inflation and upcoming central bank meetings”.

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