FTSE 100 Slips Near 10401 Amid UK Political Crisis and BoE Rate Hike Expectations

According to the British newspaper Daily Mail, Keir Starmer plans to leave the post of Prime Minister “on his own terms” within the next month, preliminarily by June 18, although no official statements have been made so far. The ruling Labour Party recently suffered a defeat in the elections, losing around 1,200 seats in local councils and giving up control of numerous communities historically considered part of the party’s support base. After that, more than 90 Labour MPs called for changes in the leadership. The most likely candidates capable of challenging the current head of government are Wes Streeting, who left the post of Health Secretary, and Manchester Mayor Andy Burnham. Burnham was previously not a member of parliament and therefore could not run for the position, but the resignation of Makerfield MP Josh Simons allows him to compete for the post in a by-election. Starmer’s intention to resign “on his own terms” is an attempt to ensure a controlled transition of power and avoid chaos in domestic politics. According to Daily Mail, conflicts within the British government have intensified in recent days, while Starmer reportedly feels “betrayed” by some cabinet members, especially amid both public and private calls from certain Labour figures for a leadership change. Investors believe that any new government may fail to maintain the required level of fiscal discipline, potentially leading to higher public spending, borrowing and government debt.

Meanwhile, the latest macroeconomic data point to steady inflation growth across the main categories of the economy, increasing the likelihood of an interest rate hike by the Bank of England. The Consumer Price Index came in at 0.7% month-on-month, compared with a forecast of 0.9%, and slowed from 3.3% to 2.8% year-on-year, in line with analysts’ expectations of 2.8%. At the same time, the core indicator changed from 0.2% to 0.7% month-on-month and from 2.0% to 2.4% year-on-year, respectively. Experts note that the slowdown in annual inflation was mainly driven by lower electricity and gas prices, supported by government measures that reduced both variable and fixed tariffs.

The corporate earnings season also continues. British Land Company Public Ltd., the largest real estate development and investment company in the United Kingdom, reported revenue of 193.11 million pounds, below the forecast of 213.51 million pounds, while earnings per share came in at 0.141 pounds versus 0.144 pounds expected. Today, after the close of the trading session, multinational telecommunications holding company BT Group plc will publish its results, with revenue expected to reach 4.94 billion pounds, compared with 10.24 billion pounds last year, while EPS may come in at 0.032 pounds versus 0.030 pounds.

At the moment, the debt market is showing a local corrective decline in yields: 1-year bonds are trading at 4.180%, slightly below 4.282% recorded the previous day, 10-year bonds at 4.992% versus 5.124%, while 20-year and 30-year bonds are yielding 5.605% and 5.666%, compared with 5.746% and 5.801%, respectively.

The top gainers in the index are Marks and Spencer Group Plc (+6.64%), Babcock International Group Plc (+5.30%), Rolls-Royce Holdings plc (+5.15%), Antofagasta Plc (+4.74%) and International Consolidated Airlines Group S.A. (+4.63%).

Among the main decliners are Experian Plc (–2.95%), Centrica Plc (–1.89%), Relx Plc (–1.78%), Games Workshop Group Plc (–1.46%) and Autotrader Group Plc (–1.37%).

Support and resistance levels

On the daily chart, the index continues its local correction, again attempting to approach the resistance line of the descending channel in the 10500.0–9700.0 range.

Technical indicators are showing an unstable sell signal, which is slowing amid the correction: the EMA fluctuation range on the Alligator indicator is gradually narrowing, while the AO histogram is forming new corrective bars below the transition level.

Support levels: 10200.0, 9790.0.

Resistance levels: 10500.0, 10860.0.

Short positions can be opened after the price consolidates below 10200.0, with a target at 9790.0. Stop-loss — 10350.0. Expected timeframe: 7 days or more.

Long positions can be opened after the price consolidates above 10500.0, with a target at 10860.0 and a stop-loss at 10350.0.