UK's FTSE 100 climbs on energy boost; inflation woes, political uncertainty in focus
Market Performance and Key Drivers
May 18 (Reuters) - UK's blue-chip FTSE 100 gained on Monday, lifted by energy stocks tracking higher crude oil prices, while the more domestically focused midcap index was subdued amid concerns about inflation and Prime Minister Keir Starmer's future.
The FTSE 100 ended 1.3% higher at 10,323.8 points, while the FTSE 250 ended 0.07% lower after falling as much 0.7% earlier in the day.
Political Developments Impacting Markets
Prime Minister Keir Starmer's Position
• Earlier in the day, Starmer's deputy said he would not set out a timetable for his departure, defying calls to quit from his party's lawmakers. Starmer said he remained focused on doing his job.
• The prime minister has dug his heels in despite intense pressure following a set of poor local election results earlier this month.
Labour Leadership Challenges
• 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 are concerned that Burnham could usher in a period of more government spending and borrowing, straining Britain's already stretched public finances.
Expert Commentary
• "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.
Economic Factors and Sector Movements
Inflation and Energy Prices
• With shipping through the Strait of Hormuz still disrupted, inflation worries have gripped markets, particularly as oil prices stay elevated.
• Brent crude futures rose 1.6% as worries over supply disruption from the Iran war offset a report the U.S. had accepted temporarily waiving sanctions on Iranian crude. Energy stocks rose 2.9%.
Other Sector Performances
• Homebuilder stocks dropped 0.5%. Asking prices for British homes in May rose by more than usual for the time of year, property website Rightmove said.
• Bank stocks climbed 1% as the finance ministry laid out planned changes to ring-fencing rules, which it said would create a "more agile and proportionate regime".
Reporting Credits
(Reporting by Niket Nishant and Shashwat Chauhan in Bengaluru; Editing by Nivedita Bhattacharjee and Shilpi Majumdar)
