UK stocks rally after political reassurance from PM Starmer and optimism from a new US-Vietnam trade agreement; housebuilders, banks, and retailers lead the charge.
July 3, 2025 16:33PM IST — The FTSE 100 climbed 0.4% on Thursday, bouncing back after a sharp midweek sell-off triggered by uncertainty over Chancellor Rachel Reeves’ future. The recovery in UK assets was further supported by a US-Vietnam trade deal, which boosted global investor sentiment.
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Markets had recoiled on Wednesday as speculation over Reeves’ resignation led to a spike in UK gilt yields and a sharp fall in the British pound. However, Prime Minister Keir Starmer’s strong backing of the chancellor helped stabilize the situation.
“Starmer declaring his support for the chancellor has led to gilt yields pulling back and sterling rebounding after yesterday’s slump,” said Dan Coatsworth, investment analyst at AJ Bell. “The market’s initial reaction was a loss of confidence in the UK’s economic and political stability, but today’s rebound signals that the crisis has been averted—for now.”
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Despite Reeves’ declining popularity due to tax hikes and welfare reforms, the bond market appears to consider her a steady hand, as reflected in Wednesday’s spike in yields amid speculation of her departure.
UK Stocks in Relief Rally
Investor relief was evident across the board, particularly in UK-centric FTSE 100 stocks like NatWest, Lloyds, Sainsbury’s, and Marks & Spencer, which were among the top gainers.
Retailers were buoyed by positive earnings from Currys, which resumed dividend payments after a long strategic overhaul.
At the time of writing, 87 out of 100 FTSE stocks were trading in the green.
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Global Boost from US–Vietnam Trade Deal
The mood was also lifted by overnight gains in US markets following a trade deal between the US and Vietnam, which carried over into European trading.
“The details remain to be seen, but it is good to have some more certainty,” said Craig Martin, Chairman of Dynam Capital, which manages the Vietnam Holding Investment Trust.
He noted former President Trump’s praise of Vietnamese General Secretary To Lam, and described the trade offer as a classic negotiation tactic: “Start with a 46% ask, settle around 20%, and it feels like a win.”
Vietnam’s strategy appears focused on diversifying trade partnerships and strengthening its domestic economy, which market watchers say could serve as a template for other emerging economies navigating global realignments.
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FTSE 100, UK stock market, Rachel Reeves, Keir Starmer, UK bond yields, British pound recovery, US Vietnam trade deal, global market news, NatWest, Lloyds, Currys results, UK political economy, Vietnam trade, Trump news