Europe: Shares rise after UK’s Truss resigns as prime minister

EUROPEAN shares rose on Thursday after Liz Truss said she was resigning as the United Kingdom’s prime minister, brought down by her economic programme that wrecked havoc on markets. The region-wide Stoxx 600 closed 0.3 per cent up after flirting between gains and losses right after the announcement in London.

Appointed on Sept 6, Truss was forced last week to sack her finance minister and closest political ally, Kwasi Kwarteng, and abandon almost all of her economic programme after their plans for vast unfunded tax cuts crashed the pound and British bonds, forcing the Bank of England to intervene.

A leadership election will be completed within the next week. Sterling rallied and the London’s FTSE 100 closed higher.

“Truss took on an extra relevance to markets because of the policies that she attempted to implement and the markets’ reaction to them,” said Steve Sosnick, chief strategist at Interactive Brokers.

“You’d think that if someone was that deeply unpopular the market might rally or the currency might rally when she left. But I think the fact that neither is happening is telling us that markets do crave political stability and we don’t have that.”

Meanwhile, Finnish telecom equipment maker Nokia and rival Ericsson reported weaker-than-expected earnings, bruised by ongoing patent battles which pressured margins and offset strong demand for 5G equipment.

Shares of the companies slumped 7.6 per cent and 14.8 per cent, respectively.

More than half of the sectors advanced, with tech rising 1.94 per cent. Telecom was the biggest loser, down 2.5 per cent.

The Stoxx 600 had snapped a four-day rally on Wednesday, as earnings optimism was snuffed out by worrying inflation reports from Canada and the United Kingdom that fanned fears about more aggressive policy moves from central banks to rein in prices.

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“There has been a pretty negative reaction in risk assets and bond markets to the inflation data. It ultimately means central banks like the Fed and the Bank of Canada may have to do even more work to tighten,” said Stephen Gallo, European head of FX strategy for BMO Capital Markets.

Adding to the concerns, data on Thursday showed German producer prices rose more than expected in September, as energy prices soared.

However, in a bright spot, Finnish banking group Nordea beat profit estimates, while Hermes added 1.6 per cent after the Birkin bag maker saw a sharp pickup in sales growth with no signs of a slowdown.

Among other stocks, Swedish Match AB gained 1.9 per cent after Philip Morris International raised its buyout offer for the nicotine products maker. REUTERS