Sterling rises as Starmer pledges to stay on after Labour's local election losses

May ⁠8 (Reuters) - Sterling climbed against ​the euro and the dollar on Friday after local election results in Britain so far ​confirmed ‌expectations of significant losses for the ruling Labour Party, but Prime Minister ⁠Keir Starmer said he would not resign. Starmer’s Labour ⁠haemorrhaged support in areas reporting ​results overnight, with results still rolling inon Friday.

Markets also remained focused on developments in the Middle East.

"Angela Rayner, clearly from the left of the party, ‌would scare bond markets, as likely would Andy Burnham," he added, naming two Labour politicians often cited as ‌potential challengers to Starmer.

Gilts rose slightly on Friday with the 10-year yield down one basis point at 4.94%. The U.S. dollar index edged down ​on Friday after renewed hostilities broke out between the U.S. and Iran. U.S. President Donald ‌Trump told reporters the ceasefire was still in effect.

In the UK local elections, analysts argued on Thursday that a poor result by Labour ⁠was ⁠anticipated, while an immediate leadership challenge to Starmer ‌was not priced yet.

"There have already been calls for him to set a timetable for ​handing over ​power," Mohit Kumar, an economist at Jefferies, said. "From ‌a market's perspective, any replacement would be a left-leaning candidate and be fiscally negative," he added. (Reporting by Stefano Rebaudo and Harry Ropertson; editing by Amanda Cooper, Susan Fenton and Toby Chopra)