FTSE closes lower as Andy Burnham unveils cabinet

UK stocks closed lower on Monday as investors weighed continued geopolitical tensions in the Middle East alongside the appointment of Andy Burnham as the United Kingdom's new prime minister and the formation of his cabinet.

The FTSE 100 declined 0.7%, marking its biggest one-day fall in about two weeks.

The FTSE 250 slipped 0.3%, while the small-cap index eased 0.2%.

Investor sentiment remained subdued as the United States carried out its ninth consecutive day of strikes on Iran and Yemen's Iran-aligned Houthis announced a naval blockade on Saudi Arabia, adding to concerns over regional stability and global energy markets.

Burnham appoints senior cabinet ministers

Burnham began assembling his new government shortly after taking office, naming a mix of experienced ministers from Sir Keir Starmer's administration and several longtime allies.

John Healey returned to the cabinet as chancellor, less than two months after resigning as defence secretary over disagreements about defence spending plans.

Healey had argued the previous government needed to commit more resources to national defence and now faces the challenge of addressing an estimated £5 billion gap in the defence spending programme inherited from the previous administration.

Ed Miliband was appointed foreign secretary after serving as energy secretary under Starmer.

A former Labour leader, Miliband has been a prominent advocate for the UK's net-zero agenda and continues to support the government's green energy transition while moving into one of the country's most senior diplomatic roles.

Shabana Mahmood retained her position as home secretary, continuing responsibility for immigration, national security and policing.

Mahmood has developed a reputation within Labour as a strong advocate of tighter immigration policies while remaining one of the party's most senior cabinet members.

Louise Haigh, one of Burnham's closest political allies, was appointed chancellor of the Duchy of Lancaster, first secretary of state and Cabinet Office minister.

She will oversee the newly created Number 10 North unit, which Burnham has said will focus on devolving power and supporting regional economic development.

Markets assess fiscal outlook

Investors are now focused on the economic direction of the new government.

The appointment of John Healey as chancellor comes at a time when Britain faces tighter fiscal conditions, rising borrowing costs and heightened geopolitical uncertainty.

Long-dated UK government bond yields moved higher during Monday's session, with the yield on the 30-year gilt reaching its highest level in two months.

The market is also assessing how the new administration will balance spending commitments with a challenging fiscal backdrop after Burnham pledged to introduce measures aimed at easing pressure on households.

Rate-sensitive sectors lead declines

Interest-rate-sensitive sectors were among the weakest performers on Monday.

Homebuilders led losses across the FTSE 350, falling 3.5%, while utilities declined 1.4% as higher bond yields weighed on defensive sectors.

Pharmaceutical and biotechnology shares also weakened, with AstraZeneca falling 1.7%.

Banks lost 0.7%, while industrial metal miners dropped 1.1% amid broader risk aversion.

Airline stocks came under pressure after Ryanair reported that quarterly profit fell by about one-third due to higher fuel costs and lower fares. Wizz Air declined 2.9%, while British Airways owner IAG and easyJet each slipped about 1.4%.