UK Midcap Stocks Drop as Inflation and Starmer Uncertainty Hit Investors
Market Movements and Political Developments Impacting UK Stocks
May 18 (Reuters) - UK's midcap FTSE 250 index fell on Monday as concerns about inflation and Prime Minister Keir Starmer's future cast a shadow over markets.
The FTSE 250 fell 0.59% as of 10:55 am GMT, while the blue-chip FTSE 100 index edged 0.16% higher.
Political Uncertainty Surrounding Prime Minister Keir Starmer
• Starmer will not set out a timetable for his departure, his deputy said on Monday, defying calls to quit from his party's lawmakers.
• The Prime Minister has dug his heels in despite intense pressure following a set of poor local election results earlier this month.
Potential Labour Leadership Challenge
• Last week, Greater Manchester Mayor Andy Burnham said he would seek to contest a parliamentary seat becoming vacant after a colleague decided to stand down, paving the way for him to challenge Starmer for the Labour leadership.
• Investors have been concerned that Burnham could usher in a period of more government spending and borrowing, straining Britain's already stretched public finances.
Market Reactions to Political Shifts
• "The political centre of gravity is likely to shift left. And yes, there is pressure to adapt the fiscal rules. But politicians across the spectrum are presumably acutely aware there are limits," said James Smith, developed markets economist, UK, at ING.
Inflation and Sector-Specific Market Movements
• With shipping through the Strait of Hormuz still disrupted, inflation worries have also gripped markets, particularly as oil prices stay elevated.
• Brent crude futures rose 1.1% and were on track to gain for the third consecutive session. Energy stocks rose 2.1%.
• Homebuilder stocks dropped 2.4%. Asking prices for British homes in May rose by more than usual for the time of year, property website Rightmove said.
• Bank stocks were 0.3% lower even as the finance ministry laid out planned changes to ring-fencing rules that it said would create a "more agile and proportionate regime."
• British Gas owner Centrica rose 2.8% and was the biggest gainer on the FTSE 100, after Berenberg raised its price target on the stock.
Reporting Credits
(Reporting by Niket Nishant in Bengaluru; Editing by Nivedita Bhattacharjee)
