UK Prime Minister Keir Starmer faced a critical cabinet meeting Tuesday as a rebellion inside his own party grew to more than 70 lawmakers calling on him to resign or set out a timetable for his departure, according to CNBC.
The political turmoil sent financial markets into retreat. The yield on the benchmark 10-year UK government bond, known as a gilt, rose almost 10 basis points to 5.099%. The British pound fell 0.5% against the US dollar and lost 0.3% against the euro. British banking stocks sold off sharply, with Natwest down 4.6%, Lloyds down 4.1%, and Barclays down 4%, leading losses on the FTSE 100. The pan-European Stoxx 600 opened 1.2% lower on Tuesday, with all sectors and major bourses in negative territory.
The crisis followed what was described as a make-or-break speech by Starmer on Monday, in which he took responsibility for the party's poor performance in local council elections and acknowledged he had "doubters." He pledged to "face up to the big challenges" facing the country, but the speech failed to calm the rebellion. Several ministerial aides resigned on Monday in its wake.
Cabinet ministers, reportedly including Home Secretary Shabana Mahmood, told Starmer to lay out a plan to leave Number 10, CNBC reported. The timing is particularly difficult for the government because the King's Speech, which lays out the government's legislative priorities at the state opening of parliament, is scheduled for Wednesday.
London Mayor Sadiq Khan told CNBC he was not calling for a change in prime minister, but offered a pointed assessment of the party's direction. "We have not been bold enough, we've not been brave enough. We are in danger of losing the next general election pretty badly," Khan said. He also called on Labour to commit to rejoining the European Union at the next general election, describing Brexit as "the biggest act of economic self-harm any country has ever done."
The political upheaval in the UK added to pressure on European markets already dealing with fading hopes for a US-Iran peace agreement. President Donald Trump said Monday that the ceasefire with Iran was "on life support" after rejecting Tehran's counterproposal. Trump described the state of the month-old truce as "unbelievably weak" and called Iran's counterproposal "garbage." Oil prices rose in response to the comments. US stock futures hovered near flat overnight as traders awaited the April consumer price index reading, with economists polled by Dow Jones expecting inflation to have gained 3.7% from a year earlier.
Corporate earnings also remained in focus for European investors on Tuesday, with Siemens Energy, Munich Re, and Imperial Brands among the companies scheduled to update shareholders on their finances.
