Liz Truss has failed to quell the turmoil in financial markets as investors attempted to assess the fallout from Kwasi Kwarteng’s sacking. Sterling fell 1.3% to $1.1188 on a rollercoaster day for the currency. The pound dropped sharply after Kwarteng’s exit from the cabinet was confirmed before recovering some lost ground as Jeremy Hunt was named chancellor. Investors were then spooked again by the brief press conference given by Truss, sending sterling down after she failed to outline a new policy direction and instead vowed to “see through” what she had promised. The FTSE 100 made significant gains as news of Kwarteng’s sacking emerged. However, the prime minister’s appearance erased almost all of its advance in afternoon trading, with the blue chip index up just 8 points at 6,858 on the day. Government bonds rallied before she spoke, pushing yields – the interest rate in relation to the price of the bond – sharply lower. But the yield on the 30-year bond then rose 3 basis points to 4.8% and the 10-year yield rose 2bps to 4.3%, meaning government borrowing costs will rise. Lord O’Neill, a former Conservative minister and Goldman Sachs chief economist, said Truss had “raised the importance of responding to the financial markets so she’s essentially making herself dependent on the markets”. O’Neill, who served as a Treasury minister in David Cameron and Theresa May’s governments and is now advising Labour, added: “Economic growth is not something you can just magic up. I have a bit of time for [Jeremy Hunt], he is more sensible than many that have been around but he’s not a magician. “The tone of how she said the little she said was essentially ‘the framework’s the same’ so the problem is: how is the world supposed to believe that the UK is suddenly going to achieve 2.5% growth? We’re awaiting answers and in some ways I’m surprised the markets haven’t reacted more negatively.” Danni Hewson, financial analyst at the stockbroker AJ Bell, said: “Markets were terrified that the ‘mini-budget’ was unfunded and fiscally irresponsible … The writing was on the wall when markets surged in anticipatory delight on the news that another post-budget U-turn was imminent and moves on corporation tax have gone a long way to bolstering sentiment today. But it’s a sticking plaster that’s already curling at the edges.” It came as the Bank of England’s emergency bond-buying programme came to an end, having bought a total of £19.3bn over the two-week scheme. That included £1.5bn worth of UK bond purchases on Friday, which was down from a high of £4.7bn on Thursday. It suggests there was a drop in demand for emergency cash from certain pension funds that last month were at risk of collapse. The Bank of England’s emergency intervention was meant to limit damage in a corner of the pension funds market that was sensitive to a sudden and severe fall in the value of UK government debt after the government’s mini-budget. The drop in gilt prices last month had forced pension funds involved in complex hedging arrangements to raise cash by selling gilts at speed to pay their banks. However, those gilt sales further depressed prices, resulting in bigger cash calls, which forced schemes to sell more gilts to raise money. The central bank programme was meant to halt the “doom loop” and give fund managers time to rebalance their portfolios.