Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Another UK political crisis is looming over the City of London today, as prime minister Sir Keir Starmer faces more calls to set out a timetable for his departure.
The bond market is fimly in the spotlight, after government borrowing costs jumped yesterday as Starmer’s ‘make-or-break’ speech failed to reassure investors, and prompted some Labour MPs to fall for his departure.
The Guardian reported last night that two senior cabinet ministers – Yvette Cooper, the foreign secretary, and Shabana Mahmood, the home secretary – were understood to have told the prime minister he should oversee an orderly transition of power, after last week’s local elections.
Starmer on the brink as cabinet ministers urge him to quitRead moreThe pound has dropped against the dollar this morning, down half a cent to $1.3560.
Sterling is being “weighed down by political uncertainty as PM Keir Starmer faces pressure to step down”, reports IG analyst Tony Sycamore.
City investors will be watching Westminster, where Starmer is due to hold a cabinet meeting today.
Bond yields (which rise when price fall) could push higher if traders anticipate that a change of leadership would lead to higher spending, and more borrowing, and a break from the government’s fiscal rules.
Jim Reid, strategist at Deutsche Bank, explains:
UK borrowing costs rise as Starmer speech fails to dispel investor ‘jitters’Read moredouble quotation markWith a Cabinet meeting expected this morning, today could be a big day in determining Starmer’s future.
In response to the uncertainty, 10-year UK gilt yields rose +8.6bps to 5.00% yesterday, whilst the 30-year yield rose +9.3bps to 5.67%, given expectations that a new Labour leader may face pressure to ease the fiscal rules and raise gilt issuance.
The agenda
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10am BST: ZEW economic sentiment index for the eurozone
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11am BST: NFIB US business optimism index
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1.30pm BST: US CPI inflation report for April
