The FTSE 100 index closed up 0.35% and the FTSE 250 was up 1.91%, amid indications that the Government was about to U-turn on some of hte measures in the ‘mini-budget’ which sparked turmoil in financial markets.
After hints that the Government would reverse a planned cut in corporation tax, markets recovered – with Chancellor Kwasi Kwarteng saying , “Let’s see,” in an interview with the Telegraph.
Chris Beauchamp, analyst at trading firm IG said in a client note, “It looks like the market is pricing in a rising probability that a major U-turn (and even potentially several U-turns) are likely, improving the UK’s fiscal outlook while simultaneously leaving the new PM and her chancellor looking like they are unable to control events.”
Stuart Cole, head macro economist at Equiti Capital said, “There is confidence that the government is finally taking heed of what the market has been trying to tell it these past couple of weeks.”
“Given the risk to Truss, I expect we will see measures announced that do not reverse totally what was announced in the mini-budget, but rather it will be made significantly less generous, just enough so that she can avoid losing too much face.”
Gilt yields eased, and bank stocks gained in the aftermath, with Natwest Group (GB:NWG) up 7.63% and Lloyds bank (GB:LLOY) up 6.14%.
British business news today
Truss in crisis talks over new tax U-turn (FT)
Andrew Bailey ‘will be forced to extend pension help’ (Telegraph)
‘Don’t prolong the pain’, IMF chief warns Chancellor (Times)
