Bond markets seemed unphased by the frenzy of speculation engulfing the Westminster cocoon over alleged plots to unseat the Prime Minister.
Sir Keir Starmer was forced to defend himself amid speculation that he could be replaced as Lanbour leader, insisting the Cabinet was united and getting on with running the country.
Ministers demanded the Prime Minister sack Morgan McSweeney, his most senior aide, after briefings from No 10 accused Health Secretary Wes Streeting of plotting to remove Sir Keir from office.
Amid an increasingly toxic atmosphere, the markets refused to be induced into a panic reaction.
Danni Hewson, head of financial analysis at investment platform, AJ Bell said: “The gilt market has been relatively sanguine in the face of rumours that MPs are plotting to replace Keir Starmer as Labour leader. Perhaps that’s because the press briefings appear to be coming from within the tent at 10 Downing Street.
“One suspects that if the market did truly believe Starmer was on the ropes, gilts would noticeably sell off. That’s certainly what happened when the chancellor’s tears in the House of Commons prompted concern she could be on the way out in the summer.
“A new leader could lead to a change in economic direction, and a less disciplined set of fiscal rules, which would likely not go down too well with the bond market.
“However, an index-linked gilt auction taking place today received record demand. That suggests the market isn’t too worried about the latest political rumours swirling around the prime minister.
“Or perhaps it’s just more worried about inflation right now. Either way, the forthcoming Budget, and the public and parliamentary reaction to it, promise to be a significant moment for the bond market.”
Equity markets also shrugged off the turmoil in Downing Street with the FTSE 100 hitting a new intra-day high as it continued its steady advance on the 10,000 milestone. After falling into negative territory for much of the session it resumed its upward trajectory and closed 11.82 points (0.12%) higher at 9,911.42, just under 1% below the symbolic level.
“Partly that’s down to investors looking for alternatives to the highly valued US stock market,” said Hewson.
“What’s surprising is this strong market performance has come against a backdrop of sterling strengthening against the dollar since the start of the year, which serves as a headwind to the FTSE 100 because of its overseas earnings.
“Hitting 10,000 before the end of 2025 would cap off a simpering year for the FTSE 100, but it carries no significance for investors beyond being a satisfying milestone.”
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