The FTSE 100 rallied on Wednesday, led by mining stocks, while government bonds stabilized as Prime Minister Sir Keir Starmer maintained a precarious grip on power.
The FTSE 100 closed up 60.03 points, or 0.6%, at 10,325.35. The FTSE 250 finished up 62.17 points, or 0.3%, at 22,528.37, and the AIM All-Share rose 6.55 points, or 0.8%, to 817.21.
In London, reports suggested that Health Secretary Wes Streeting plans to resign and could lodge a formal challenge to Sir Keir on Thursday.
Streeting confronted his party leader about the crisis engulfing the Labor Party as the pair met for crucial talks – lasting less than 20 minutes – in Downing Street ahead of the King's speech.
According to multiple reports, Streeting has told allies that he is preparing to leave the government on Thursday and run for the top job.
The pound rose to US$1.3520 on Wednesday afternoon from US$1.3505 on Tuesday. Against the euro, sterling rose to 1.1542 euros from 1.1517 euros on Tuesday.
The British 10-year bond yield traded at 5.07%, cooling from 5.10% the previous day.
Kathleen Brooks, head of research at XTB, said markets “remain sensitive to all the news coming out of Westminster, and it is difficult to see how the Prime Minister can stop another coup against him.”
JPMorgan analyst Allan Monks said political developments create significant uncertainty over the future leadership of the ruling Labor Party and therefore the future direction of fiscal policy.
“While the odds of a leadership change this year have increased, the precise path and outcome remain difficult to judge. A relevant observation for the bond market is the significant amount of time it could take to gain clarity on the fiscal outlook,” he said.
Monks estimates that the costs of further borrowing since March, when the Middle East crisis erupted, are around £11bn, reducing the Government's fiscal space to £13bn.
Elsewhere, the fragile ceasefire in the Middle East held as US President Donald Trump headed to Beijing for talks with his counterpart Xi Jinping.
The International Energy Agency warned that countries were tapping into oil inventories and strategic reserves at a “record pace”, meaning greater price volatility was likely.
Brent crude for delivery in July was trading at $107.33 a barrel on Wednesday, compared to $108.07 on Tuesday at the close of the London Stock Exchange.
In Europe on Wednesday, the CAC 40 in Paris rose 0.4% and the DAX 40 in Frankfurt rose 0.8%.
In New York, the Dow Jones Industrial Average fell 0.4%, the S&P 500 rose 0.2% while the Nasdaq Composite rose 0.7%.
The 10-year US Treasury yield widened to 4.50% on Wednesday from 4.46% on Tuesday. The 30-year US Treasury yield stretched from 5.02% to 5.05%.
The euro traded lower against the US dollar, at $1.1715 on Wednesday from $1.1729 on Tuesday. Against the yen, the dollar was trading at 157.81 yen, up from 157.73 yen.
Following Tuesday's strong US consumer inflation numbers, producer price data also surprised to the upside.
The Bureau of Labor Statistics said producer price inflation accelerated to 6.0% in April, from 4.3% in March, the latter revised upward from 4.0%. The latest reading, the highest in more than three years, surpassed the consensus cited by FXStreet of 4.9%.
Mining stocks supported the blue-chip FTSE 100, with Antofagasta up 8.7%, Metlen Energy & Metals up 7.2%, Anglo American up 4.5% and Rio Tinto up 4.4% as metals prices rose.
Fresnillo, which rose 4.0%, benefited from a strong gold price, with the yellow metal trading at $4,690.487 an ounce on Wednesday, up from $4,663.87 on Tuesday.
Intertek gained 5.3% in backing suitor EQT Fund Management Sarl's latest takeover bid, after rejecting three previous proposals.
EQT's final proposal is worth £60 per share in cash, £61,077 including a final dividend. Along with the dividend, the tilt values Intertek at £9.4 billion.
Intertek said it “remains very confident” in its standalone strategy and value creation plan. But he said EQT's offer would “deliver cash value to Intertek shareholders.” Consequently, I would be “willing to recommend it” should a firm offer materialize.
Airtel Africa fell 13% as Bharti Airtel confirmed it will increase its stake but buy shares at a discount to the previous closing price.
On Monday, the shares soared 15% after Bharti Airtel, which has a 63% stake in the company, called a meeting for Wednesday to consider a reorganization of the shareholding structure of its subsidiaries, including Airtel Africa.
On the FTSE 250, Vistry was in the doldrums, down 12%, as it warned that first half profits will be “significantly lower than last year”.
JPMorgan analyst Zaim Beekawa said “it's a pretty disappointing update given the magnitude of the downgrades involved and, in particular, given that street numbers have already declined significantly.”
Elsewhere, recruitment firms PageGroup and Hays fell 5.6% and 7.4% respectively, while Swiss peer Adecco slumped 17% after flagging weaker margins in the second quarter.
While Cordel shareholders were all smiles as their share price doubled after accepting a £29m bid worth 12.4p per Vossloh share.
The biggest risers on the FTSE 100 were Antofagasta, up 345.00p to 4,299.00p, Metlen Energy & Metals, up 2.70p to 40.18p, Intertek Group, up 280.00p to 5,580.00p. up to 352.00p to 8272.00p.
The biggest fallers on the FTSE 100 were Airtel Africa, down 54.20p to 359.60p. Relx, which fell 122.00 pence to 2,333.00 p. 76.00p to 2756.00p.
Thursday's global economic calendar has UK GDP data at 7am, followed by US retail sales figures and the weekly initial jobless claims report.
Thursday's local corporate calendar includes first-quarter results from insurer Aviva and full-year earnings from property investor Land Securities, luxury goods brand Burberry and electricity generator National Grid.
Contributed by Alliance News
