HE a pound took off, the cost of government loans fell and stormy Stock exchange some peace returned, how markets welcomed signs of stability from the central government.

With the former chancellor Rishi Sunak on the way to becoming new prime ministerleading economic indicators have at least stopped pricing in Armageddon after weeks of turbulence.

While recent economic indicators remain challenging, there was a sense of some calm today.

UK business activity fell for the third consecutive month in October, according to the latest PMI data.

That growth indicator fell from 49.1 in September to 47.2 – any number above 50 indicates growth – so today’s figure is indicative of a severe recession and was much worse than City experts had expected.

But the pound rose almost a cent to $1.136, with fears that it would reach parity with the dollar for the time being on the back burner.

And the massive sell-off in government bonds that wreaked havoc on pension funds and forced the Bank of England to intervene has eased.

The yield on 10-year British gilts fell from over 4% to 3.8% today, a sharp drop that reduces future government borrowing costs and is a sign of faith in the expected new government.

Suzanne Streeter of Hargreaves Lansdown said: “This suggests that bond watchers have been calmed by expectations of a calmer political horizon ahead with fiscal responsibility forecast to be the new prime minister’s new mantra. Whoever takes the lead will face an uphill task, given a looming recession, volatile energy prices, long tangled supply chains and labor shortages, and the Bank of England determined to raise interest rates amid a shaky economy to tame rampant inflation “.

Today, however, the Bank was under less pressure to raise rates, precisely because bond yields are falling.

Interest rates are expected to reach 5% next year, up from over 6% a few weeks ago. This should be good news for those who are renegotiating mortgage deals.

The FTSE 100 fell 42 points to 6,923, driven by falls in companies that make most of their money overseas, a sign of the pound’s relative strength today.

The broader mood music remains bleak. Billionaire private equity kingpin and Tory donor Guy Hands told the BBC that the UK economy was “frankly doomed” and Britain was “on the way to becoming the sick man of Europe”.

AJ Bell financial analyst Danny Hewson said: “At least incoming prime minister Rishi Sunak knows the markets are on his side. Investors are clearly hoping that Sunak will stabilize the economy and the political situation — though it’s hard to tell at this point which is the more difficult task. As well as a recovery in the pound and a reduction in the cost of government borrowing, Sunak will be pleased to see European gas prices moving in the right direction thanks to moderate temperatures across the continent. And although the outlook is still filled with dark clouds, for the first time in a while you can see the light.”