U.S. stocks applauded the surprise resignation of Liz Truss as traders bet the exit of the shortest-serving prime minister in British history would restore a measure of calm to the U.K. currency and bond markets.
Truss said on Thursday she would resign as British prime minister, brought down just six weeks into the job by an economic program that shattered investor confidence and enraged much of her Conservative Party.
Speaking outside the door of her Number 10 Downing Street office, Truss accepted that she had lost the faith of her party and said she would step down next week.
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The move was an abrupt reversal for Truss, who said on Wednesday she was a "fighter and not a quitter." But the following day she told a mass of journalists gathered in Downing Street that she realized she could no longer deliver on the promises that won her the Conservative leadership.
"I have therefore spoken to His Majesty the King to notify him that I am resigning as leader of the Conservative Party," said Truss, who was supported only by her husband with her aides and loyal ministers noticeably absent.
A new leadership election will be completed by next Friday, Oct. 28. Those expected to run include former finance minister Rishi Sunak and Penny Mordaunt, a former defense minister.
Truss's resignation ends a brief but inglorious chapter for the U.K. Her so-called "mini-budget" created chaos in the market for British government debt and sent the pound on a roller-coaster ride.
Financial experts were unsparing in their criticism of Truss's short but eventful tenure, and what are expected to be deleterious and long-lasting consequences.
"First her policies went up in flames, then her brief career as Prime Minister," noted Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown. "The great political gamble of Liz Truss has spectacularly backfired but not before wreaking significant damage to the U.K. economy. It will take considerable time before the risk premium attached to U.K. assets fades away, following the financial nervous breakdown which followed the mini-budget."
British government bond prices rose on Thursday, although their gains were tempered by the prospect of another week of political upheaval as the Conservative Party chooses a successor to Truss.
How Stocks Are Reacting
U.S stock futures started in the red Thursday as news of Truss's resignation reverberated through global markets, and the major benchmarks did gap down at the open.
But markets on the American side of the Atlantic soon bounced back, with the major U.S. benchmarks rising sharply within the first hour of trading. The blue-chip Dow Jones Industrial Average added more than 380 points at one point early in the session. The broader S&P 500 and tech-heavy Nasdaq Composite tacked on similarly smart gains.
Strength in mega-cap tech stocks such as Apple (AAPL) and Microsoft (MSFT) helped power markets higher, as did gains in Amazon.com (AMZN). Dow stock International Business Machines (IBM) rallied after the company reported better-than-expected quarterly results and raised its full-year outlook.
It's also the case that an encouraging start to what is forecast to be the worst earnings season since the height of COVID-19 lockdowns of 2020 has given U.S. equities a tailwind in recent sessions.
The market is also benefiting from technical strength, analysts say, although few are calling for a definitive end to our current bear market anytime soon.
The major indexes' initial reaction to the end of the Truss premiership appears to be one of good riddance to bad rubbish. But a state of bedlam persists in Britain. Instability at the top of the world's sixth largest economy will surely send out more shockwaves in the days, weeks and even months ahead.
Reuters reporters Kate Holton, Farouq Suleiman, William James, Sachin Ravikumar, Kylie MacLellan, Elizabeth Piper, Andrew MacAskill, Muvija M and Andy Bruce contributed to this article.
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