- UK long-term borrowing costs have surged to a 28-year high, with the yield on 30-year government bonds (gilts) jumping 13 basis points to 5.807%, while 10-year gilts also rose to 5.11%.
- This increase in borrowing costs, which makes it more expensive for the government to borrow from financial markets, occurred as Prime Minister Sir Keir Starmer's leadership faced increasing pressure and calls to resign from within his own party.
- The pound also weakened significantly amidst the political instability, falling 0.6% against the US dollar to 1.352 and 0.2% against the euro to 1.152.
- London's stock market saw the FTSE 100 Index drop over 1% in early trading before settling 0.5% lower, influenced by rising crude oil prices, which climbed 2% to over 106 dollars a barrel due to the US-Iran deadlock.
- Analysts, including Saxo UK's Neil Wilson, warned of further market volatility and a potential 'gilt rout' until political leadership clarity is achieved, highlighting risks from a fragile fiscal position and potential increased spending under a new, more left-leaning leadership.
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