The FTSE 100 Healey chancellor reaction lifted London’s leading index 0.3% on Tuesday as investors broadly welcomed Andy Burnham’s opening moves as prime minister, including the surprise appointment of John Healey to the Treasury and a pledge to remove VAT from household electricity bills.
Gilt yields pulled back after jumping the previous afternoon when Burnham made remarks about fiscal flexibility. The UK 10-year gilt yield, which had been holding near 4.95%, fell to an intraday three-week low of 4.891% on Tuesday, according to Trading Economics data.
Gilt Yields Ease as Healey Chancellor Reaction Calms Bond Markets
Dan Coatsworth, head of markets at AJ Bell, said Healey’s appointment had not unsettled investors. ‘John Healey’s surprise appointment as chancellor hasn’t troubled the markets as he is seen as a safe pair of hands,’ he said. ‘His extensive parliamentary career including roles in the Treasury are seen as putting him in good stead.’
Coatsworth said bond markets had reacted favourably, adding: ‘Gilt yields eased back after a jump yesterday afternoon when prime minister Andy Burnham made remarks about fiscal flexibility. While he has pledged to stick to existing rules, he implied there is some wriggle room within them.’
Burnham moved quickly to reassure investors after the initial market surprise. ‘The comments initially caught the market off guard, but Burnham was quick to say he wouldn’t take any risks with the economy,’ Coatsworth said.
On fiscal initiatives, Coatsworth noted that Burnham had laid out plans including the removal of VAT on household electricity bills, to be funded by cancelling the digital ID programme.
Babcock Leads FTSE 100 Gainers on Defence Spending Hopes
Babcock International was the index’s top riser. Healey previously served as defence secretary before resigning over what he described as inadequate funding for defence, and investors expect his Treasury role to direct more spending towards the sector.
Babcock operates across four divisions: Marine, Nuclear, Land, and Aviation, employing approximately 30,481 full-time staff as of its most recent fiscal year ending 31 March. Babcock (BAB.L) carried a market capitalisation of approximately £5.51 billion as of 31 July, with shares trading around 1,168.57p against an average analyst price target of 1,411.67p.
Miners also advanced. Antofagasta rose 3% while Glencore added 2%, with the latter’s gains coming as investors digested its H1 2026 results, which included an announcement of approximately $1.5 billion in additional shareholder returns. That comprised an $8.5 cents-per-share special cash distribution worth approximately $1.0 billion and a $500 million buyback, bringing Glencore’s total announced full-year 2026 shareholder returns to approximately $3.5 billion, according to its H1 2026 report filed on the London Stock Exchange (LSE).
Glencore (GLEN.L) carried a market capitalisation of approximately £63.63 billion as of 31 July.
UK-facing consumer stocks also moved higher. Marks and Spencer jumped 3% as traders positioned for increased household spending following the VAT removal pledge on electricity bills.
Healey’s confirmation as chancellor and the specific policy details around energy bills give gilt markets a clearer fiscal anchor; the next test comes when the new Treasury team sets out a full budget timeline.
