Markets Tuesday Open: Post-Deal Rally Continues; Brent at $89.10; Rating Agencies Weighing Burnham Factor
UK and European markets continue the post-deal risk-on positioning Tuesday. The FTSE 100 opens at 10,640, up 0.19% on Monday’s 10,620 close; Brent crude eased to $89.10 a barrel from $89.50; UK 10-year gilt yields slipped to 4.85% at a four-month low. The Bank of America commentary raised the probability of an August Bank Rate cut to 35% from 25%. The Reuters wire Tuesday morning reports credit rating agencies are weighing how Andy Burnham could shape Britain’s public finances as prime minister; the agencies expect the Burnham-Reeves continuity to hold. The Bank of England MPC’s decision this week is the binding macro variable.
The Brent $88-95 band that delivers a flat Ofgem October price-cap reset is now the operative range; Brent at $89.10 sits at the lower bound. The Bank of England MPC’s decision this week is materially easier with Brent at $89 and gilt yields below 5%. The Chancellor Rachel Reeves fiscal-headroom position is materially eased through the leadership-transition uncertainty. The rating agencies’ framing — that the Burnham-Reeves continuity is the expected base case — is the structural credit signal that the leadership transition would not materially impair the UK sovereign credit profile. Moody’s and S&P are reportedly conducting interim assessments ahead of the post-Makerfield window.