Live news updates from October 24: Sunak to become UK prime minister, China misses GDP target

US authorities have charged two Chinese intelligence officers with seeking to obstruct the criminal prosecution of Huawei, in one of three cases announced on Monday that government officials say shines a light on Beijing’s “flagrant violation of international laws”.

In court filings, the Department of Justice alleged two Chinese citizens paid a US law enforcement officer $61,000 in bitcoin to obtain information on the prosecution and probe against a big Chinese telecoms company.

While the company was not named, details in the legal documents match Huawei’s description. Reuters also cited a person familiar with the matter confirming the company was Huawei.

Guochun He and Zheng Wang, who remain at large, were charged with obstruction of justice. He was also charged with money laundering in relation to the bribes paid in bitcoin.

As part of the alleged scheme, which began in 2019, He and Wang were accused of seeking information on company employees interviewed by the US government as well as prosecutors’ trial strategy, evidence and witness list. Unbeknown to them, the US government employee was also working with the FBI, prosecutors said.

Huawei did not immediately respond to requests for comment. The DoJ in 2020 accused it of seeking to misappropriate intellectual property from US technology companies. Huawei has pleaded not guilty to charges of racketeering and stealing trade secrets.

Read more on the charges here

US stocks rose on Monday as investors prepare for a busy earnings week for blue-chip technology groups, whose results will be used as a barometer for the health of the consumer economy.

On Wall Street, the benchmark S&P 500 closed 1.2 per cent higher, while the tech-heavy Nasdaq Composite added 0.9 cent, continuing a rally from last week, driven by news that the Federal Reserve may soon slow the pace of interest rate rises.

That positive sentiment will be tested this week as investors examine earnings from Meta, Amazon, Microsoft and Alphabet, which will offer guidance on the strength of the US consumer in a year where online spending and digital advertising revenues have decelerated in the face of rising inflation.

Apple, which on Monday increased prices on its music and TV services, will also report earnings this week. Its shares rose 1.5 per cent on Monday.

Meanwhile, investors worldwide issued a sceptical verdict on Xi Jinping’s third term in office, selling shares in Chinese companies after the country’s leader wrapped up a Communist party congress that signalled a shift in focus from the economy to security.

The sell-off began on Monday morning in Asia, where Hong Kong’s Hang Seng Tech index fell 9.7 per cent, a one-day move that matched its largest ever drop.

Wall Street followed suit, with Nasdaq’s Golden Dragon index, which tracks US-listed shares in Chinese companies, falling by a record 14.4 per cent on Monday as Alibaba, JD.com and Pinduoduo sold off heavily. The index is down by about 50 per cent this year.

Analysts said the sell-off was compounded by Beijing’s release of economic data that showed China’s GDP grew by 3.9 per cent year-on-year in the third quarter, below the government’s annual goal of 5.5 per cent.

Read more on the day’s market moves

Investors worldwide issued a sceptical verdict on Xi Jinping’s third term in office, selling shares in Chinese companies after the country’s leader wrapped up a Communist party congress that signalled a shift in focus from the economy to security.

The sell-off began on Monday morning in Asia, where Hong Kong’s Hang Seng Tech index fell 9.7 per cent, a one-day move that matched its largest ever drop. It continued into the US trading day, where several of the most well-known Chinese tech groups listed on Wall Street fell sharply.

Nasdaq’s Golden Dragon index, which tracks US-listed shares in Chinese companies, fell 14.4 per cent as Alibaba, JD.com and Pinduoduo faced heavy selling. The record one-day drop for the index left it down by about 50 per cent so far this year.

Analysts said that the sell-off was compounded by Beijing’s release of economic data, delayed while the party conference was under way, that showed China’s economy grew by 3.9 per cent year-on-year in the third quarter, below the government’s annual goal of 5.5 per cent.

But they also noted that Xi’s overhaul of the party leadership during the week-long 20th party congress, which ended at the weekend, had given power to loyalists more concerned with China’s geopolitical rivalry with the US than with economic reform.

“The risk is more about groupthink and thought capture and the line about the dire need to struggle with the US,” said Gerard DiPippo, a former senior China economy analyst at the CIA. “It is reasonable from a market perspective that, whatever hope you had of a liberal turn in China, is probably lower now than it was on Friday.”

Read more on the market reaction to Xi Jinping’s political overhaul here

US stocks rose on Monday as investors prepare for a busy earnings week for blue-chip technology groups, whose results will be used as a barometer for the health of the consumer economy.

The benchmark S&P 500 had gained 1.4 per cent by the afternoon in the New York, while the tech-heavy Nasdaq Composite had risen 1 per cent, continuing a rally from last week, driven by news that the Federal Reserve may soon slow the pace of interest rate rises.

That positive sentiment will be tested this week as investors examine earnings from Meta, Amazon, Microsoft and Alphabet, which will offer guidance on the strength of the US consumer in a year where online spending and digital advertising revenues have decelerated in the face of rising inflation. The quartet of tech groups gained on Monday, with Microsoft leading the gains with a 2.2 per cent rise.

Apple, which on Monday increased prices on its music and TV services, will also report earnings this week. Its shares were up 1.8 per cent in afternoon trading.

In the UK, gilts rallied sharply on Monday as Rishi Sunak was confirmed as the UK’s next prime minister, with investors betting that the former chancellor would stick to the economic policies that have calmed markets in recent days.

The 10-year gilt yield sank 0.34 percentage points to trade at 3.71 per cent, reflecting a sizeable rise in price. The pound climbed by as much as 0.9 per cent against the dollar in early trading before falling back amid a broad rise for the US currency to trade little-changed on the day at $1.1285.

Read more on the day’s market moves here

Apple has raised prices for its TV+, Music and services-bundle subscriptions for the first time since their respective launches, becoming the latest consumer tech group to increase fees as inflation soars.

The iPhone maker increased the price of Apple Music in the US by $1 to $10.99 a month, citing “an increase in licensing costs”, and said artists and songwriters would make more money as a result. Family plan prices went up $2 to $16.99 a month.

Apple also raised the price of its Netflix rival, TV+, by $1 to $5.99 a month. The cost of an Apple One subscription — an all-access pass to its music, TV, arcade, cloud, news and fitness offerings — rose $2 for individuals, to $14.95 a month, and $3 for a family pass, to $22.95 a month.

Apple is the latest tech company to raise prices as inflation soars and puts more pressure on consumers. In February, Amazon lifted the price of a US Prime subscription by $20 to $139, citing higher wage and transportation costs, and its Music Unlimited plan went up $1 to $8.99 a month in April.

Netflix earlier this year raised prices in the US, a move the company later said prompted some subscribers to cancel. Disney-Plus is raising the cost of its ad-free service from $7.99 to $10.99 a month, and Hulu also recently lifted prices, with its ad-supported tier up $1 to $8 a month, and its ad-free plan up $2 to $15 a month.

The US has assessed there is no indication Russia has decided to deploy nuclear weapons, as some Western officials have warned Moscow could use false claims about a Ukrainian “dirty bomb” as pretence for possible escalation.

“We still have seen nothing to indicate that the Russians have made a decision to employ nuclear weapons,” a senior military official said, adding that the US is continuing to monitor the situation closely. The US has also not had indications that Russia has decided to use chemical or biological weapons, the official said.

Russian defence minister Sergei Shoigu alleged over the weekend that Ukraine was preparing an imminent “dirty bomb” attack, claims which Western officials denounced as untrue.

The senior US military official said Monday that Ukraine is “not building a dirty bomb” and repeated the Biden administration’s warnings that “the world would see through any attempt to use this allegation as a pretext for escalation”.

Senior US officials will continue intense diplomacy as Western capitals have sounded alarms over Russia potentially using nuclear weapons.

US defence secretary Lloyd Austin will speak to his Ukrainian counterpart on Monday after two calls with his Russian counterpart at the weekend, and will speak to other allies in the coming days, the senior military official said. US secretary of state Antony Blinken also spoke to his Ukrainian counterpart over the weekend.

The chair of the joint chiefs of staff, Gen. Mark Milley, spoke with his Russian counterpart Gen. Valery Gerasimov on Monday for the first time since May, according to his spokesman Col. David Butler.

Cape Town’s mayor has called on South Africa’s government to bar Alexei Mordashov’s superyacht from docking in its port after the sanctioned Russian oligarch’s vessel left Hong Kong bound for the city.

Mayor Geordin Hill-Lewis on Monday said that he had lobbied Naledi Pandor, the South African foreign minister, over a “moral duty” to block one of Russia’s richest men before his yacht, the ‘Nord’, is set to arrive in Cape Town next month.

The 142-metre yacht has already become a symbol of chequered global compliance with western sanctions on Russia’s elite over the war in Ukraine after it docked in Hong Kong’s waters for weeks despite US pressure.

In the early days of the war, the Russia-flagged vessel made a dash for Vladivostok after weighing anchor in the Seychelles.

South African President Cyril Ramaphosa’s ruling African National Congress has declined to condemn Russia over the war and abstained from a UN vote this month on condemning Russia’s annexation of Ukrainian land.

The city government of Cape Town, which is run by the main opposition Democratic Alliance, does not have its own powers to deny port entry.

“To the best of our knowledge, Mr Mordashov is aboard the vessel and intends to enter South Africa through the port of Cape Town,” Hill-Lewis said. “If this happens, Mr Mordashov — and his luxury yacht — will be considered to be guests of the South African state.”

The “Nord” was sailing through the Strait of Malacca on Monday, with its arrival in Cape Town set for November 9, according to the MarineTraffic ship tracking site.

Mordashov is the owner of Severstal, one of Russia’s biggest steel producers, and his Severgroup used to own a stake in Bank Rossiya, known as “Putin’s bank”.

“It must be said that so far, our country’s foreign policy conduct in relation to Russia’s illegal, imperialist war has been nothing less than shameful,” Hill-Lewis said. “Here is an opportunity to correct some of those errors of judgment and stand up for what is clearly right.”

This post has been corrected since publication to reflect that Severstal is not Russia’s biggest steel producer and Mordashov no longer owns a stake in Bank Rossiya

European industrial users of aluminium have urged governments against sanctioning Russian metal, warning that it would destroy large corners of the region’s manufacturing base.

Five trade associations based in Belgium, Germany and Italy demanded that the EU and member states urgently intervene against moves to restrict the flow of Russian metal, which they believe could cause aluminium prices to skyrocket.

The comments come as the US is considering banning or applying tariffs to Russian aluminium, or sanctioning Rusal, Russia’s largest producer of the lightweight metal used in cars, planes and cans.

At the same time, the London Metal Exchange is currently weighing up a ban on Russian metal because of the risk that large volumes of it could be dumped in the exchange’s warehouses should many buyers voluntarily opt to shun the product. That could then result in a distortion of global price benchmarks.

However, the trade groups, which include the Federation of Aluminium Consumers in Europe, fear the “massive unintended economic consequences” of any move to hit Russian aluminium supplies. In 2018 when the US sanctioned Rusal, it caused the price of the metal to rise 35 per cent and resulted in turmoil for industrial supply chains in Europe.

“Boycotting, banning or sanctioning Rusal amounts to no more than the destruction of the independent downstream European aluminium industry,” the groups said.

They added that Rusal is a “strategic partner” for the EU because it supplies 30 per cent of the alumina and up to 20 per cent of the primary metal that the continent needs to support its downstream aluminium industry.

Rishi Sunak has made his first public comments since winning the Conservative party’s leadership contest earlier today.

In a brief televised address from Conservative headquarters in London, Sunak paid tribute to his predecessor Liz Truss and said it was “the greatest privilege of my life to be able to serve the party I love and give back to the country I owe so much to.”

However he warned that the country faced a “profound economic challenge” and that it needed “stability and unity” in order to build a more prosperous future.

“I pledge that I will serve you with integrity and humility,” Sunak said.

Downing Street confirmed that the formal transition of power will not take place on Monday.

“I can confirm that the transition won’t be taking place today,” the prime minister’s spokesperson said. “Beyond that there are discussions ongoing between the outgoing PM, the incoming PM and the Palace with regards to timetable.”

US business activity shrank for a fourth-straight month in October, missing economists’ expectations for both the services and manufacturing sectors as inflation and slowing demand damped outlooks.

The “flash” purchasing managers’ index from S&P Global dropped to 47.3 in October from 49.5 in September, missing the consensus estimate of 49.3, according to a Refinitv poll. A reading below 50 indicates a contraction in the sector.

The decline was “led by a downward lurch in services activity, fuelled by the rising cost of living and tightening financial conditions,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

Firms’ outlook optimism “deteriorated markedly in October,” S&P said in its report. “The resulting degree of confidence was among the lowest in survey history” in the index’s second-fastest decrease since 2009.

While companies are hopeful that demand will increase after inflation peaks, they remained concerned about high prices, the cost of living and “the worsening broader economic outlook amid interest rate hikes and weak customer sentiment,” the S&P report added.

The “flash” services activity index declined to 46.6 in October from 49.3 in September, missing economist forecasts of 49.2.

The “flash” manufacturing PMI fell to a 28-month low of 49.9 in October, down from 52 in the prior month. Economists had been anticipating a reading of 51. While the sector has proved more resilient than its services counterpart, there was a steep drop in demand for goods in October, meaning backlogs are keeping current output afloat, Williamson said.

Former Conservative prime ministers Liz Truss and David Cameron were among the first to send their congratulations to Rishi Sunak after Tory MPs backed the former chancellor to become the country’s first non-white leader.

Opposition leaders meanwhile clamoured for a general election to be called.

“Congratulations Rishi Sunak on being appointed as leader of the Conservative party and our next prime minister,” Truss, who quit last week, said in a tweet. “You have my full support.”

Cameron extended his “huge” congratulations to Sunak on becoming prime minister “to lead us through challenging times” and wished him “the v best” and his “wholehearted support”.

Deputy Labour party leader Angela Raynor said in her tweet: “The Tories have crowned Rishi Sunak without him saying a word about what he would do as PM,” she said.

“He has no mandate, no answers and no ideas. Nobody voted for this,” Raynor said and pushed again for a general election.

“The Conservatives have trashed our economy, pushed health services to the brink, and added hundreds of pounds to people’s mortgage payments,” Ed Davey, Liberal Democrat leader, said in a tweet on Monday. “Now Conservative MPs have installed another out-of-touch Prime Minister without giving you a say. We need General Election NOW.”

SNP leader Nicola Sturgeon said she will do her best to “build a constructive working relationship with [Sunak] in the interests of those we serve”.

“I’d suggest one immediate decision he should take and one he certainly should not. He should call an early general election. And he should not — must not — unleash another round of austerity. Our public services will not withstand that.”

Foreign secretary James Cleverly has called Rishi Sunak’s victory in the Conservative party leadership contest a positive outcome that will offer the UK “some certainty”.

Sunak gained the support of more than 100 Tory MPs in the leadership contest. After addressing his fellow MPs later today, Sunak will head to Buckingham Palace to see King Charles and will then start appointing his cabinet.

Cleverly, who until Sunday backed Boris Johnson in the leadership contest, switched his support to Sunak after the former prime minister withdrew his candidacy.

“Even another week of delay would have been counterproductive,” Cleverly told the BBC. “I am very, very pleased that we will now be able to focus on things that matter, which is working for the British people.”

The former chancellor “was the candidate with the most experience”, Cleverly said, adding that the past few months have been “brutal” and “painful”.

Cleverly said other countries want Britain to be a “rock of stability”, adding that he did not know whether he would stay on as foreign secretary in Sunak’s cabinet.

Economists said that Sunak’s victory in the Conservative leadership contest had reduced risk of a prolonged period of political instability and economic downturn.

Ruth Gregory, senior UK economist at Capital Economics said that “the fall in gilt yields on the news today that Rishi Sunak will become the UK’s next prime minister has reduced the chances of a significant fiscal consolidation”.

This, she added, was because his election means that “the big downside risks to the economy posed by a prolonged period of political instability and a significant fiscal tightening have receded”.

However, she said the new prime minister would still have to work hard to restore stability in the eyes of the financial markets and would still have to fill a fiscal hole of around £34bn.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said that “the pandemic spending spree is well and truly over and the former chancellor will take the top job in the guise of a strict and austere headteacher”.

Shevaun Haviland, director-general of the British Chambers of Commerce said the political and economic uncertainty of the past few months “has been hugely damaging to British business confidence and must now come to an end”.

“The new prime minister must be a steady hand on the tiller to see the economy through the challenging conditions ahead,” Haviland added.

UK opposition parties have questioned the political credibility of Rishi Sunak’s appointment as prime minister and reiterated their calls for a general election.

“The Tories have crowned Rishi Sunak as prime minister without him saying a single word about how he would run the country and without anyone having the chance to vote,” said Angela Rayner, deputy leader of the Labour party.

“This is the same Rishi Sunak who as chancellor failed to grow the economy, failed to get a grip on inflation, and failed to help families with the Tory cost of living crisis.”

This sentiment was echoed by leader of the Liberal Democrats Sir Ed Davey. “The Conservative party has trashed the British economy, pushed local health services to the brink, and added hundreds of pounds to people’s monthly mortgage payments,” he said.

“Now Conservative MPs have installed another out-of-touch prime minister with no plan to repair the damage and without giving the British people a say.”

Confirmation that Rishi Sunak will be the UK’s next prime minister was met with a muted reaction in financial markets.

Sterling slipped 0.17 per cent against the dollar to $1.1283, erasing earlier gains, following Penny Mordaunt’s decision to drop out of the race for the Tory leadership.

In bond markets, yields on 10-year gilts slipped 0.231 percentage points to 3.819, reflecting a rise in prices.

Michael Michaelides, fixed income analyst, Carmignac, said the appointment of a new prime minister “should see the political drama settle,” but warned that the UK remained a risky bet for international investors.

“For us, it’s not so much who is in Downing Street that matters but what they do,” Michaelides said.

Rishi Sunak has won the Conservative leadership contest after winning the support of more than 100 fellow MPs.

Sunak is due to address Tory MPs in the 1922 committee at 2.30pm.

Before Sunak’s formal appointment as prime minister, Liz Truss will go to Buckingham Palace to submit her resignation to King Charles III.

Shortly after that, Sunak will be invited by the King to form a government.

He will then return to Downing Street to start appointing his cabinet.

Leadership contender Penny Mordaunt on Monday formally withdrew from the Tory party race, paving the way for former chancellor Rishi Sunak to become the UK’s next prime minister.

Mordaunt, who serves as Leader of the House of Commons, received fewer than 30 public nominations from parliamentarians, despite some suggestions from her campaign team earlier on Monday that she had support from more than 90 backers.

In a statement on Twitter, Mordaunt said that she was “proud” of her campaign and would throw her support behind Sunak.

“We all owe it to the country, to each other and to Rishi to unite and work together,” she said.

“Despite the compressed timetable for the leadership contest it is clear that colleagues feel that we need certainty today,” she added. “They have taken this decision in good faith and for the good of the country.”

The first stage of the Conservative party leadership contest will come to a head at 2pm when the deadline for candidates expires.

Rishi Sunak, former chancellor, is favourite to become the next UK prime minister, having won the public backing of at least 188 MPs.

Penny Mordaunt, leader of the House of Commons, has also declared her candidacy but has yet to confirm whether she has reached the threshold of 100 backers to progress to the next stage.

Mordaunt will be eliminated from the contest should she fail to reach the 100 threshold by 2pm, leaving Sunak as the sole candidate and new prime minister.

If Mordaunt reaches the threshold, the winner will be chosen via an online ballot of Conservative party members to be held from Tuesday until 11am on Friday.

MPs have launched a formal inquiry into the recent turmoil in the gilt market that led to a liquidity crunch for thousands of pension plans.

The work and pensions select committee announced on Monday that it would conduct a short inquiry on the “lessons to be learned” from events that affected schemes using liability-driven investment (LDI) strategies, which are sensitive to moves in gilt yields.

Most of the UK’s 5,200 defined benefit schemes use derivatives to hedge against moves in interest rates and inflation. The derivatives require cash collateral to be added depending on market moves.

A sharp rise in the yield of long-dated gilts that followed September’s “mini” Budget sparked a liquidity crunch for pension funds which faced margin calls on these LDI contracts.

The Bank of England swooped in with a £65bn emergency bond-buying programme days later after retirement schemes struggled to sell bonds to meet the margin calls.

“Recent economic volatility and the intervention of the Bank of England has highlighted the risks of defined benefit schemes using liability-driven investments,” said Sir Stephen Timms MP, chair of the work and pensions committee.

“Our inquiry will examine whether there are sufficient safeguards in place to protect the value of pension funds. It will also look at the role of trustees and the regulator in ensuring proper governance arrangements and whether LDIs are still fit for purpose for use by defined benefit schemes.”

Russia’s defence ministry has “readied all forces and capabilities” to deal with the effects of a possible nuclear explosion after Moscow claimed, without providing evidence, that Ukraine was developing a “dirty bomb”.

Lieutenant General Igor Kirillov, commander of Russia’s nuclear, chemical and biological defence forces, said on Monday that Ukraine wanted to detonate a conventional explosive to spread radioactive material on its own country to frame Moscow of doing so and undermine support for Russia worldwide.

Kirillov’s briefing, which accused Ukraine of reaching the “final stage” of building a nuclear weapon and requesting support from the UK, marked the first time that Russia had raised its level of preparation for potential nuclear use since the early days of president Vladimir Putin’s war eight months ago.

Ukraine has denied Russia’s claims, which it said was “dirty blackmail” aimed at pressuring western partners into dropping their support for Kyiv and pushing it to accept a peace deal on Moscow’s terms.

Though Kirillov gave no evidence that Ukraine was working on a nuclear weapon, the warnings hinted at Russia’s increased readiness for a possible detonation.

Putin warned he was ready to use “all the means at our disposal” to defend Russia after announcing the annexation of four Ukrainian regions partly held by Moscow last month.

Russian defence minister Sergei Shoigu held phone calls with his US, UK, French and Turkish counterparts on Sunday to discuss Moscow’s claim of the “dirty bomb”.

The UK’s Northern Ireland minister has insisted there will be no change to policy regarding post-Brexit trading arrangements despite the change of prime minister.

Regional elections will be called on Friday, Steve Baker added, unless the Democratic Unionist party could “choke down” its refusal to return to the power-sharing executive by then.

Speaking at a British-Irish Parliamentary Assembly event in Ireland, Baker said “whichever prime minister the UK returns will continue our policy of reaching an agreement acceptable to all sides”.

Rishi Sunak, who is frontrunner to become UK prime minister, said during the summer Conservative party leadership campaign that he wanted a negotiated settlement with the EU. He however remained committed to a bill before the House of Lords that would give London powers to scrap key parts of the protocol.

It was not clear whether Baker, who has put his support behind Sunak, or secretary of state Chris Heaton-Harris, who on Monday switched to Sunak after initially backing a return of Boris Johnson, would keep their jobs.

The Democratic Unionist Party has refused to re-enter the Stormont executive and assembly until it sees sweeping changes to the protocol.

But unless the executive is restored by one minute past midnight on October 28, the UK has a legal obligation to call a fresh election in Northern Ireland.

Heaton-Harris has said he sees no room to table emergency legislation to change that.

Baker called on the DUP to “just find it within themselves to choke down the position they’ve taken — just get into the executive, do it this week and we can avoid an election” and insisted “the next prime minister will maintain the UK’s policy on the protocol”.

But DUP leader Sir Jeffrey Donaldson appeared unmoved.

“When a new prime minister is in place, if they want to see a fully functioning Stormont, they will have to deal with the protocol once and for all. Short-term fixes will be a disservice to Northern Ireland,” he said in a message to party members at the weekend.

Penny Mordaunt’s campaign team has claimed that the Conservative party leadership contender has won the backing of more than 90 Tory MPs, just under the required threshold of 100.

The campaign was unable to provide the names of those MPs, prompting scepticism among some colleagues. The number of declared Mordaunt supporters had only reached 26 as of Monday morning.

Time is running out for Mordaunt to reach the ballot of Conservative party members, with a deadline of 2pm today for declarations.

By contrast, Rishi Sunak, the former chancellor who came second to Liz Truss in the previous leadership race in the summer, has 168 declared MPs.

Because of the opaque nature of the contest, it has been possible for some contenders to make bold claims about their support without verification.

Backers of Boris Johnson, the former prime minister, said on Saturday that he had the backing of more than 100 MPs, only to concede on Sunday night that he would not be entering the contest.

Even then Johnson insisted that he had 102 unnamed MPs prepared to endorse him to become prime minister for the second time.

European equities edged higher on Monday and US stock futures fell ahead of a week of third-quarter earnings results for Big Tech companies including Meta, Alphabet and Amazon.

The regional Stoxx Europe 600 gauge was up 0.4 per cent by late-morning trading in London, while Germany’s Dax rose 0.4 per cent even as S&P Global’s flash eurozone composite purchasing managers’ index — a key measure of business activity in the region — fell to its lowest level since November 2020.

Peter Vanden Houte, chief economist at ING, said Monday’s figure “clearly confirms that the eurozone economy is already in recession”, adding that forward-looking components of the survey implied there was more bad news to come.

Futures contracts tracking Wall Street’s S&P 500 fell 0.5 per cent ahead of the New York open. The broad-based index last week recorded its biggest five-session gain since June, adding 4.7 per cent, as investors responded to reports that the Federal Reserve may begin to slow the rate at which it raises interest rates from December.

In bond markets, the yield on the benchmark 10-year US Treasury note was flat at 4.21 per cent.

In the UK, prices for 10-year gilts climbed, pushing yields down 0.17 percentage points to 3.88 per cent after Boris Johnson dropped out of the race to become the UK’s next prime minister, leaving Rishi Sunak and Penny Mordaunt as the two remaining candidates.

London’s FTSE 100 index fell 0.5 per cent, while sterling gained 0.1 per cent against the dollar to $1.131 in morning trading. It also advanced 0.6 per cent against the euro to €1.152.

Read more about markets here.

UK economic activity contracted at its fastest pace in nearly two years, suggesting that the country has fallen into a recession during a period of political uncertainty and high energy and borrowing costs.

The S&P Global/Cips flash UK composite output index, a measure of activity in the private sector, dropped to a 21-month low of 47.1 in October from 49.1 in September.

This is the third consecutive reading under 50, which indicates a majority of businesses reporting a contraction in activity, and is below the 48.1 forecast by economists polled by Reuters.

The gloomy outlook comes during a period of political turmoil in the UK, with candidates battling for the leadership of the ruling Conservative party after Liz Truss was deposed last week.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said that October’s flash PMI data showed “the pace of economic decline gathering momentum” after the recent political and financial market upheavals.

The economy “therefore looks certain to fall in the fourth quarter after a likely third quarter contraction, meaning the UK is in recession”, he noted.

Adding to signs of weakening underlying demand, new orders decreased at the fastest pace since January 2021, attributed to a downturn in business and consumer confidence in recent months.

UK private sector companies also indicated a fall in business expectations for the year ahead, caused by inflationary pressures, political uncertainty and rising interest rates.

The manufacturing sector remained in a downturn for the third consecutive month, while the services sector reported the first contraction in 20 months.

Credit Suisse has agreed to pay a €238mn fine in France to settle a tax evasion and money laundering investigation into how it allegedly went after wealthy French clients to move their assets to Switzerland.

The Swiss bank has been trying to draw a line under a series of legal probes as it prepares for a major overhaul under chief executive Ulrich Körner.

Credit Suisse was accused by French authorities of encouraging wealthy clients in France to set up bank accounts in Switzerland between 2005 and 2012, which were then out of reach of the French taxman.

“The visits (from Credit Suisse commercial staff) were done very discreetly, in hotels, in restaurants, and never in official buildings,” said the magistrate overseeing the settlement.

Credit Suisse lured 5,000 French clients in that period, accumulating assets of some €2bn, and making a profit of €65mn on that business, the judge said. Many of the French clients who had evaded taxes as a result had settled their cases separately, according to financial prosecutors.

A lawyer for Credit Suisse said the bank had agreed to the settlement. The deal “underscored the end of efforts undertaken for many years to fix a much vaster problem which has been discussed between the European Union and Switzerland and which has led to accords” over bank transparency.

Credit Suisse did not admit any guilt under the settlement.

UBS was last year ordered by a French appeals court to pay €1.8bn for helping rich clients evade tax.

Business activity in the eurozone has suffered its biggest contraction for almost two years, adding to signs that the bloc is entering a recession due to rising prices and plummeting output among manufacturing and services companies.

S&P Global’s flash eurozone composite purchasing managers’ index, a key gauge of business conditions, fell 1 point to 47.1, figures out on Monday showed. That is its lowest level since November 2020 and the fourth consecutive month below the crucial 50 mark separating growth from contraction.

“The eurozone economy looks set to contract in the fourth quarter given the steepening loss of output and deteriorating demand picture seen in October, adding to speculation that a recession is looking increasingly inevitable,” said Chris Williamson, chief business economist at S&P Global.

The results of the monthly survey, which showed falling factory output, declining new orders, rising factory gate prices and plummeting expectations, were worse than expected by economists polled by Reuters.

German business activity contracted in manufacturing and services, dragging its PMI reading down 1.6 points to 44.1, its lowest level since May 2020.

French companies reported a stagnation of activity with expansion in services activity offsetting a decline in manufacturing to take their PMI reading down 1.2 points to 50, a 19-month low. Factory orders fell at a pace only exceeded in the 2008 financial crisis and 2012 eurozone debt crisis.

Rishi Sunak is the favourite with betting markets to become Conservative leader and the next UK prime minister, with his position strengthening since Boris Johnson dropped out on Sunday.

Sunak has been the frontrunner since Liz Truss resigned last week, but betting on the Betfair site on Monday suggested he had a 95 per cent chance of beating his rival Penny Mordaunt, whose odds have barely changed since Johnson dropped out.

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Bookmakers also make Sunak the hot favourite. William Hill gives Sunak odds of 1/50, while Mordaunt trails at 12/1.

Senior Conservative party MPs Priti Patel, James Cleverly and Michael Gove have switched their support to Rishi Sunak in the leadership race.

Patel, the former UK home secretary and a backer of Boris Johnson, showed her hand hours before the 2pm deadline for candidates to reach the second stage of the contest.

Sunak is the only candidate to have surpassed the 100 votes needed. Penny Mordaunt has a handful while Johnson stood aside on Sunday.

Patel transferred her vote from Johnson to Sunak on Monday, joining others such as Nadhim Zahawi, who was chancellor in the final throes of the Johnson administration. Zahawi had also favoured his previous boss and made the switch to Sunak late on Sunday.

“In these difficult times for our country we must unite by putting public service first and work together,” Patel said in a tweet. “We care about our country and with the enormous challenges upon us we must put political differences aside to give Rishi Sunak the best chance of succeeding.”

Gove also backed Sunak, calling for the Tory party to unite behind the former chancellor. “There are big challenges ahead and the national interest requires us to show resolution and fortitude under new leadership,” Gove said in a tweet.

Cleverly, the foreign secretary and another Johnson backer, posted on Twitter on Monday: “I said we needed experience at the top of government and I stand by that. The candidate with the most experience is clearly Rishi Sunak. He can count on my full support as our PM and I will be voting for him.”

The UK economy is “frankly doomed” and the country risks going to the IMF for a bailout, according to the founder and chair of one of Europe’s largest private equity firms.

Guy Hands, boss of Terra Firma Capital Partners, told Radio 4’s Today programme on Monday that the Conservative party was not fit to run the country.

“It has got to move on from fighting its own internal wars and actually focus on what needs to be done in the economy,” he said.

That includes admitting the “mistakes” it has made over the past six years that have “frankly put this country on a path to be the sick man of Europe”, said Hands, who is a longtime Tory supporter.

When the party “did Brexit”, members had a dream of a low-tax, low-benefit economy, the wealthy investor said — something that deposed prime minister Liz Truss tried to put in place but discovered was “not acceptable” to the British people.

“Once you accept you cannot do that then the Brexit you have done is completely hopeless and will only drive Britain into a disastrous economic state,” Hands said.

“If the Tory party can own up to the mistake that they made and have somebody leading it who actually has the intellectual capability and the authority to negotiate Brexit, there is possibility of turning round the economy,” he said.

“But without that the economy is frankly doomed,” he said, adding that the UK could potentially seek a bailout from the IMF.

Sterling strengthened on Monday after Boris Johnson dropped out of the race to become the UK’s next prime minister, leaving Rishi Sunak and Penny Mordaunt as the two remaining candidates.

The pound gained 0.4 per cent against the dollar to $1.1344 in morning trading in London, and advanced 0.5 per cent against the euro to €1.1519.

Derek Halpenny, head of research for global markets at MUFG Bank, said Johnson’s decision to stand aside would come as “relief to the financial markets”, adding that Sunak “stands a much better chance of bringing stability to government”.

“The removal of political instability in the UK is certainly a positive and could over the short-term provide some further support for the pound,” Halpenny said. “However, we suspect gains could be brief and would caution over how much further this news can lift the pound.”

In equities, London’s FTSE 100 index rose 0.4 per cent. Ten-year gilts also rose, pushing the yield down by 0.215 percentage points to 3.83 per cent.

Rishi Sunak will be installed as UK prime minister later today should no other candidate gain the backing of 100 MPs for the Conservative party leadership ballot.

Candidates face a deadline of 2pm to reach the second stage of the contest, which has been fast-tracked to install a new prime minister in time for a crucial budget on October 31.

The field has been cut to two — Sunak and Penny Mordaunt — following the withdrawal of former prime minister Boris Johnson late on Sunday.

Mordaunt, leader of the House of Commons, will be eliminated from the contest should she fail to gain the backing of 100 MPs by 2pm, leaving Sunak as the sole candidate and new prime minister.

An FT tracker of declared MPs shows Sunak on 149 and Mordaunt on 25.

The former chancellor reached the final round of last summer’s leadership race and is the heavy favourite to succeed Liz Truss after she resigned last week.

Should Mordaunt reach the 100 threshold, the two candidates will be voted on by rank-and-file Conservative party members in an online ballot that will run from Tuesday until 11am on Friday.

If only one candidate emerges from the parliamentary party stage, MPs will elect that person as the new leader and the online ballot for members will not be held.

Hyundai Motor expects to post record earnings this year on strong sales of premium models including electric cars and sport utility vehicles, helped by the weaker local currency.

The South Korean company on Monday raised its full-year revenue growth forecast to 19-20 per cent, from the 13-14 per cent guidance made in January, while its expected 2022 operating profit margin was raised 1 percentage point to between 6.5 per cent and 7.5 per cent.

However, the automaker flagged potential headwinds of high inflation, supply chain disruption and fluctuating raw material prices, although global shortages of chips and other components are expected to ease.

The upbeat guidance came after Hyundai reported a 3.4 per cent fall in third-quarter operating profit at Won1.5tn ($1.04bn) due to a Won1.36tn provision for engine replacement costs. Sales in the three months to September rose 30.6 per cent year on year to Won37.7tn, buoyed by the weaker Korean won, which has fallen 17 per cent against the dollar this year.

Hyundai, which ranks among the world’s top five automakers by sales together with affiliate Kia, said its third-quarter electric vehicle sales rose 27 per cent year on year to 52,000 units, accounting for 5 per cent of its total sales volume.

The company will break ground later this month on its first EV-dedicated US plant worth $5.5bn. The plant, based in Georgia, is not scheduled to begin production until 2025, making it ineligible for tax credits laid out in the US Inflation Reduction Act.

Hyundai’s executives said they would adopt a “flexible” pricing policy for its EVs and try to localise its EV components through various measures including setting up local joint ventures and actively recycling key battery materials.  

Tobias Ellwood, chair of the defence select committee and a supporter of Rishi Sunak, urged fellow Conservative MPs to rally around the former chancellor.

“We must recognise the massive hurdle of regaining the trust of the British people,” he told BBC television on Monday.

“Getting the economy right, providing stability and clarity on people’s pensions, on benefits, on mortgages, tackling inflation, getting those energy bills right,” he said.

“This is what Rishi Sunak does well and this is why I would encourage all colleagues to support him immediately,” Ellwood said.

“We fast approach a juncture in our history where we select one of two very different paths for our nation to embark upon, with huge ramifications for our party,” Ellwood said in a tweet late on Sunday. “Momentum is with Rishi — with almost half of all Tory MPs supporting him. Let’s put the country first.”

Sunak has surpassed the 100 votes needed by 2pm on Monday to be nominated for the Tory leadership. Boris Johnson stood down from the contest while Penny Mordaunt trails.

Education publisher Pearson has stuck with its full-year sales and profit forecasts despite economic headwinds, after rising sales in both its legacy business and newer markets.

In a nine-month trading update on Monday, the group reported that underlying sales were up 7 per cent, driven by growth in its assessment and qualifications and English language learning divisions, as borders continued to reopen after pandemic closures.

Sales also increased at its workforce training operation, where it has made acquisitions in innovative artificial intelligence-based companies.

Andy Bird, chief executive, said the company was executing its “plan for accelerated margin improvement” that would “lead to better outcomes for learners” and deliver value for shareholders.

The yen swung against the US dollar on Monday as traders grappled with signs of a third round of currency intervention by Japanese authorities.

After starting the morning about ¥149.71 to the US dollar, the yen jumped to ¥145.56 at 8.44am local time in the space of a few minutes. By Monday afternoon, the yen was back at the level where the morning surge had begun.

The sharp moves occurred shortly after Shunichi Suzuki, the finance minister, emphasised Japan’s resolve to curb the yen’s volatility. The currency has hovered around a 32-year-low in recent days.

“We are robustly confronting market speculators,” Suzuki told reporters in an early morning press huddle. “We will respond appropriately as needed since we cannot tolerate excessive moves in the foreign exchange market based on speculation.”

The yen is under significant pressure as the Bank of Japan sticks to its ultra-loose monetary policy in contrast with most developed economies around the world that are raising rates to curb inflation.

Despite the yen’s appreciation, traders in Tokyo said it was still very difficult to tell whether Suzuki’s latest attempt at verbal intervention had been accompanied by another yen-buying operation.

Masato Kanda, the country’s top currency official, declined to comment on whether an intervention had been carried out on Monday.

Hong Kong and China-listed equities dropped sharply on Monday, as the delayed release of the country’s gross domestic product data sent jitters through markets.

The Hang Seng index dropped as much as 5.1 per cent in morning trading, while the CSI 300 index of Shanghai- and Shenzhen-listed equities fell as much as 2 per cent.

The declines followed the unscheduled release of China’s GDP figures and other economic data, which beat expectations with an expansion of 3.9 per cent but still registered far slower growth than the country has become used to in recent decades.

Jitters were intensified by the delay in releasing the data, which were originally scheduled for last Tuesday. The figures were released with little warning after China’s landmark 20th Communist party national congress, at which Xi Jinping secured a precedent-breaking third term as president.

Xi showed little willingness to change tack from his strict zero-Covid policy during the conference. The policy, which seeks to eliminate cases of the virus with strict lockdowns, has hammered China’s growth prospects this year.

“This is panic selling,” said Dickie Wong, head of research at Kingston Securities in Hong Kong. “Quite obviously investors are simply not confident about the future of the Chinese economy.”

In markets elsewhere, Japan’s Topix rose 0.4 per cent and South Korea’s Kospi added 0.9 per cent. Those moves followed sharp increases in the US on Friday, where the S&P 500 and Nasdaq Composite both gained more than 2 per cent after a report that the Federal Reserve might slow the pace of its interest rate rises from December.

Oil prices fell after early gains, with Brent crude, the international benchmark down 0.5 per cent to trade at $93.03 per barrel and US marker West Texas Intermediate declining by the same margin to hit $84.60.

A gut microbiome developed by a Hong Kong university can reduce the risk of Covid-19 infections in some patients, researchers said on Monday.

The medical faculty at Chinese University of Hong Kong said the microbiome, known as SIM01, can also reduce the risk of fevers, dermatitis and sepsis in the elderly and among diabetics.

Results of a large-scale, clinical double-blind study also showed the microbiome can alleviate adverse events associated with Covid vaccines among high-risk groups.

SIM01 improves the balance of gut microbiota and boosts immunity to reduce the risk of bacterial and viral infections, researchers said.

“A healthy gut microbiota has been associated with lower levels of inflammatory cytokines in the body and reduced risk of adverse events after vaccination,” said Siew Ng, professor of medicine and therapeutics.

“We have demonstrated for the first time that SIM01 can restore gut microbiota to boost immunity which is particularly important for children, elderly subjects and those with chronic illnesses,” Ng added.

CUHK researchers had earlier identified distinct gut microbiome profiles associated with post-acute Covid syndrome, more commonly known as “long Covid”.

Scientists recruited volunteers “who have persistent symptoms into a clinical trial that aims to reduce long Covid by modulating their gut microbiota”, said Martin Wong, professor at CUHK’s School of Public Health.

The pound gained against the dollar on Monday morning, as investors digested the news that former prime minister Boris Johnson had pulled out of the race to return to No 10 Downing Street.

Investors had been nervous about the prospect of a Johnson comeback, just months after he was ousted as leader.

Sterling see-sawed on Monday, gaining as much as 0.9 per cent to hit a high of $1.1401, before paring gains to be up about 0.4 per cent at $1.134.

Johnson withdrew from the race to become Britain’s next prime minister after his campaign stalled and rivals claimed he did not have the backing of the 100 Conservative MPs needed to enter the contest on Monday.

The withdrawal leaves former chancellor Rishi Sunak as the clear frontrunner to succeed Liz Truss as Tory leader and prime minister, possibly as soon as Monday.

Gilt and sterling markets were turbulent towards the end of last week as investors considered the leadership race.

On Friday, Moody’s became the third credit rating agency to change the UK’s outlook from stable to negative, citing “heightened unpredictability” in policymaking and the risk of higher government borrowing costs.

South Korea’s $35bn credit support plan sparked a rally in financial markets on Monday as the massive funding scheme for corporate bonds eased concern about rising default risks at small and medium-sized enterprises and a looming credit crunch in short-term money markets.

The Kospi Composite Stock index gained 0.8 per cent on Monday afternoon — its first rise in four days — while the benchmark 10-year yield fell 16.3 basis points to 4.49 per cent.   

President Yoon Suk-yeol said on Monday that the government would speedily implement the Won50tn ($34bn) bond-buying scheme as investors were spooked by a failed debt payment by Legoland Korea’s theme park developer earlier this month.

“We determined that such swift and large-scale market stabilisation measures will above all be of great help in easing the financial difficulties of small and medium-sized firms, so they will be executed promptly starting today,” he told reporters.

The government will double the ceiling of its corporate bond buying programme by state-run banks to Won16tn as part of its biggest funding round since the country expanded its emergency funds to about Won100tn to protect businesses from the pandemic shock in 2020.

The country’s credit markets have been strained by the default of the Legoland developer, which widened credit spread to the highest levels since the Covid-19 crisis. The massive funding plan eased concerns about a broader contagion, but risks of liquidity shortages at smaller companies remain amid higher interest rates.

Nomura expects growing financial stress and slowing economic growth to prompt the Bank of Korea to rethink its policy reaction. “Ongoing domestic financial stress and growth risks argue for a shift back in its policy strategy towards domestic issues,” Park Jeong-woo, an economist at Nomura, said in a recent report.

China’s gross domestic product rose 3.9 per cent in the third quarter, as part of a delayed data release that lays bare the scale of economic challenges facing the country.

The figures, originally set for publication last Tuesday, come days after Xi Jinping extended his rule for an unprecedented third term and tightened his grip over political power at China’s 20th Communist party national congress.

While the government provided no explanation for the delay, the move was widely seen as an attempt to avoid distracting from a once-in-five-year event which overhauled the upper echelons of the Communist party.

The year-on-year growth rate, which was forecast to come in at 3.3 per cent according to analysts polled by Bloomberg, is far below China’s full-year target of 5.5 per cent — already its lowest in three decades.

The data release helped spur a broad sell-off in Chinese equities on Monday, with the Hang Seng China Enterprises index in Hong Kong falling as much as 3.2 per cent and the benchmark CSI 300 index of Shanghai- and Shenzhen-listed stocks down as much as 0.8 per cent.

China’s economy is grappling with a worsening property crisis and the impact of strict zero-Covid controls and lockdowns, which have largely curtailed the spread of coronavirus but have also crippled consumer activity.

At the congress, Xi made little reference to the country’s economic weaknesses and praised coronavirus control measures, which include almost-daily testing for citizens and quarantine rules that have effectively closed off the country from the rest of the world.

In the build-up to the event, China’s top epidemiologist said there was no timeline for a relaxation.

South Korea and North Korea exchanged warning shots early on Monday morning after a North Korean merchant ship was accused by Seoul of crossing a disputed maritime border west of the Korean peninsula.

The North Korean ship “intruded” over the so-called Northern Limit Line about 16 miles north-west of South Korea’s Baengyeong Island at 3.42am local time, according to South Korea’s military. The South Korean navy issued warnings and fired warning shots, after which the ship returned to North Korean waters.

The North Korean armed forces denied the incident, claiming instead that two South Korean military vessels had crossed the line.

In a statement released on North Korean state media, the Korean People’s Army’s General Staff said it had ordered the armed forces to fire 10 multiple-rocket-launcher artillery shells in the direction of the area where South Korea had fired its warning shots.

Tensions have mounted on the Korean peninsula in recent weeks amid speculation that North Korea is preparing to conduct its seventh nuclear test following the Chinese Communist party congress in Beijing.

This month alone, North Korea has conducted a test of long-range cruise missiles and fired an intermediate-range ballistic missile over Japan.

Pyongyang claims it is being provoked by trilateral military exercises by the US, South Korea and Japan, an assertion dismissed by the US state department as “baloney”.

Consumer confidence in the UK has reached an 11-year low, according to a third-quarter survey by Deloitte released on Monday.

The Deloitte Consumer Tracker fell for a fifth consecutive quarter, reaching minus 20 per cent, the lowest reading recorded since it began in 2011.

The survey found that 30 per cent of UK consumers were spending less, up from 21 per cent at the start of the year, and 58 per cent of those were doing so to save money.

Consumers reduced their leisure spending across almost every category, Deloitte found.

“Consumers are making conscious efforts to cut back on all spending,” said Céline Fenech, a consumer insight analyst at Deloitte in London.

“With rising food prices and personal finances coming under further pressure from higher energy bills, we are seeing a contraction in consumer demand.”

The survey found that 57 per cent of respondents were reducing home energy consumption and 40 per cent were spending less on clothes and shoes.

The tracker is based on responses from 3,226 British adults on September 17 and 18.

The US, UK and France have warned Russia against using claims of an alleged Ukrainian effort to use a “dirty bomb” as a pretext to escalate the war against the country.

The three countries issued a joint statement after Russian defence minister Sergei Shoigu held calls with his counterparts in each government.

“Our countries made clear that we all reject Russia’s transparently false allegations that Ukraine is preparing to use a dirty bomb on its own territory,” the statement said.

“The world would see through any attempt to use this allegation as a pretext for escalation. We further reject any pretext for escalation by Russia.”

Shoigu also spoke with his Turkish counterpart, Hulusi Akar, over the weekend.

A “dirty bomb” is a conventional explosive that spreads radioactive material. Kyiv has denied it has such a plan or that it was preparing to escalate the conflict.

“Russian lies about Ukraine allegedly planning to use a ‘dirty bomb’ are as absurd as they are dangerous,” Ukraine foreign minister Dmytro Kuleba said on Sunday.

Diwali: India, Malaysia, Singapore and Sri Lanka celebrate a national holiday today in observance of the beginning of the Hindu festival of lights. Diwali is also marked in the Indonesian island province of Bali.

Japan: The 35th annual Tokyo International Film Festival opens today and will run for the next week and a half.

Markets: Futures in Hong Kong and Japan pushed higher on Monday. Stocks in Asia declined over much of last week with Hong Kong’s Hang Seng index hitting its lowest level in 13 years, but gains in the US on Friday, where the S&P 500 added 2.4 per cent and the Nasdaq Composite gained 2.3 per cent, appears to have boosted investor sentiment. Traders were encouraged by reports that the US Federal Reserve might slow the rate of its interest rate increases from December.

South African president Cyril Ramaphosa has re-established a permanent anti-corruption agency in Africa’s most industrialised nation in his official response to the findings of an inquiry that blamed his governing African National Congress for the country’s worst post-apartheid graft scandal.

Ramaphosa announced the overhaul in a televised address on Sunday as part of “a new chapter in our struggle against corruption” after a decade of accusations of looting under Jacob Zuma, the former president, that has been blamed for rolling blackouts and other ills holding back South Africa’s economy.

The government will make permanent a special directorate of the national prosecuting authority that has been investigating the plunder, known locally as “state capture”. 

The move effectively revives a similar prosecutorial unit, the Scorpions, that was neutered years ago by the ANC, which has ruled the country since 1994.

“This response constitutes an ethical, moral and institutional departure from the abuses revealed [by the inquiry],” Ramaphosa said. “The people of South Africa are tired of corruption and want it to end,” he added.

The inquiry, headed by South Africa’s chief justice, concluded this year that Zuma “readily opened the doors” for looting of the Eskom power monopoly by the Guptas, three Indian-born brothers, and that he manipulated the national spy agency to pursue political opponents as part of a policy of wrecking institutions.

Read more about South Africa’s anti-corruption agency here.

MPs who had backed Boris Johnson for the leadership of the Conservative party moved quickly late on Sunday to transfer their backing to other candidates.

Nadhim Zahawi, a former chancellor of the exchequer who had come out in favour of Johnson earlier in the day, rapidly switched to Rishi Sunak. “Rishi is immensely talented, will command a strong majority in the parliamentary Conservative party, and will have my full support & loyalty,” he said in a tweet.

Michael Fabricant, who on Friday had said he supported Johnson, switched to Penny Mordaunt: “I backed Penny before when Boris couldn’t stand so despite my bitter disappointment in his deciding not to stand this time, I have returned to my natural ‘home’,” he posted on Twitter.

Sir James Duddridge, one of Johnson’s most loyal supporters, said in a tweet: “Well that was unexpected. Off to bed!”

Sunak paid tribute to Johnson for delivering Brexit and the vaccine rollout, saying: “Although he has decided not to run for PM again, I truly hope he continues to contribute to public life at home and abroad.”

Boris Johnson has pulled out of the race to become Britain’s next prime minister after his campaign stalled and rivals claimed he did not have the backing of the 100 Tory MPs needed to enter the contest on Monday.

Despite frantic attempts by Johnson to bolster his support, he announced at 9pm on Sunday that he was abandoning his bid to make a comeback as prime minister just weeks after he quit Number 10.

His withdrawal from the contest leaves former chancellor Rishi Sunak as the clear frontrunner to succeed Liz Truss as Conservative leader and prime minister, possibly as soon as Monday.

In a statement released on Sunday evening, Johnson insisted he had the support of 100 MPs — plus a proposer and seconder — but he had withdrawn in the best interests of the Conservative party and country.

“I believe I am well placed to deliver a Conservative victory in 2024 — and tonight I can confirm that I have cleared the very high hurdle of 102 nominations, including a proposer and a seconder, and I could put my nomination in tomorrow,” he said.

Read more about Johnson’s decision not to run here.

Rising energy costs and broken supply chains are the biggest concerns for medium-sized UK businesses, according to a survey released on Sunday by BDO, the accounting group.

The bimonthly survey showed 43 per cent of respondents were worried about energy price rises and potential power outages.

A quarter showed concern about supply chain disruptions, while 23 per cent said inflation was a top concern and 21 per cent cited rising interest rates and the cost of borrowing as one of the biggest threats.

BDO found that one in four of companies has increased the retail prices of their goods and services for customers while 46 per cent plan to raise or further increase the cost of goods or services in the next three months.

“Businesses are facing an exceptionally difficult operating environment with costs rising across the board, ongoing supply chain disruption in the lead-up to Christmas and an uncertain geopolitical climate,” said Ed Dwan, a BDO partner in Manchester.

The survey showed that two-thirds of businesses said the UK government was not doing enough to create opportunities for exports or market growth. A quarter of respondents called for better access to labour.

“With a leadership contest for the new prime minister now under way, businesses are calling out for certainty and the right support ahead of a tough winter,” Dwan added.