FTSE 100 index advanced on Friday and closed the week at 6,969 points even though Liz Truss resigned as the Prime Minister of the United Kingdom.
Liz Truss spent only 44 days in office, which makes her the shortest-serving Prime Minister in the history of Great Britain; still, she will remain in the role until a successor is named, with a leadership election to be completed “within the next week.”
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The resignation follows heavy criticism against the mini-budget unveiled in late September, and new finance minister Jeremy Hunt reversed almost all tax measures set out in Liz Truss’s mini-budget.
The main reason why investors digested Liz Truss’s resignation is the fact that they believe that the new Prime Minister would help to design a new approach that will cost the taxpayer significantly less than planned while ensuring enough support for those in need.
The United Kingdom will get its third Prime Minister in the year 2022, and among the candidates are Penny Mordaunt and Rishi Sunak, but there’s also a possibility that Boris Johnson could return to office.
On the other side, macroeconomic data continues to paint a gloomy picture; inflation has hit double digits while the energy crisis is in full flow as Russia continues its war in Ukraine.
Wholesale gas prices have more than doubled, affecting household budgets across the UK and driving up costs for manufacturing firms.
Last week the UK also reported that retail sales fell more than expected in September, mainly due to the fact that the rising prices hit consumer spending habits.
All of the main sectors, including food stores, non-food stores, non-store retailing, and fuel, declined compared with the previous month. GfK client strategy director Joe Staton said:
The UK’s retail sales volume slipped 1.4% month over month in September, following a revised 1.7% slip in August. The drop in sales was attributed to rising prices and the ongoing cost of living crisis exacerbated by the rising inflation rate, which returned to 10.1% in September, while the political instability in the UK also has its influence.
The upside potential for UK’s FTSE 100 index remains limited, and the near-term fate of the country’s economy will depend on how to offset the headwinds of political uncertainty, energy crisis, supply chain disruptions, and the rising cost of living.
Technical analysis
FTSE 100 index has recovered from its lows as investors cheered the reversal of Britain’s fiscal plan that had sent jitters across the markets.
The price has also moved above the 10-day moving average, which is certainly a positive sign; still, investors should keep in mind that the risk of another decline still persists.
If the price falls below the 6,800 support level, the next target could be 6,700 points. On the other hand, if the price jumps above 7,200 points, the next target could be 7,400 points.
Summary
FTSE 100 index advanced last week even though Liz Truss resigned as the Prime Minister of the United Kingdom. Last week UK reported that retail sales fell more than expected in September and the upside potential for UK’s FTSE 100 index remains limited.
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