EVENING UPDATE – The FTSE 100 closed up 0.90% and the FTSE 250 up 2.76% after a buoyant day of trading sparked by the near-complete reversal of LIz Truss and Kwasi Kwarteng’s disastrous ‘mini-budget’.
Chris Beauchamp, chief market analyst at trading platform IG said, “Stock markets, the euro and sterling are on the up, as the mood in markets turns more optimistic for the time being. The dollar’s weakening today provides another sign that risk assets are finding some short-term support, and even embattled UK assets have been lifted,” he added.
“Jeremy Hunt, arguably de facto PM of the UK, has steadied the fiscal ship of state.”
In the wake of Hunt’s announcement, the pound surged against the dollar and was trading at $1.13. The interest rate on government bonds also fell.
MORNING UPDATE – The FTSE 100 was up 0.2% and the FTSE 250 up 0.61% after a spectacular U-turn from an increasingly beleaguered Liz Truss offered hope to traders.
British Prime Minister Liz Truss hsacked Chancellor Kwasi Kwarteng and reversed parts of the disastrous ‘mini budget’ which has spooked markets and created chaos over the past two weeks.
Kwarteng resigned at Truss’s request, having returned from an IMF meeting in Washington – and Truss appointed former Health Secretary Jeremy Hunt in his stead.
Truss reversed a decision on corporation tax, which will now rise to 25% as previously planned, raising £18 billion pounds.
Paul Johnson of the Institute for Fiscal Studies said that the reversal of the corporation tax rise was “unlikely to be enough by itself to plug the fiscal gap. More than £20bn of tax cuts still in place”.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown said, “Since his departure was made clear, 10-year gilt yields have edged up slightly and the pound fell below $1.12, with no fresh euphoria in sight as markets digest another bout of political upheaval.
“For now the prime minister has won breathing space, but the financial markets are highly sensitive and anything less than a co-operative approach with the Bank of England, the Office of Budget Responsibility and international institutions could cause fresh instability.”
Supermarket delivery giant Ocado (GB:OCDO) was the biggest mover on the FTSE 100, rising 11% on news that customer Kroger is to merge with rival Albertsons. Kroger is a major customer for Ocado’s robotic warehouse technology.
British business news today
Truss ‘is still in charge’ insists Kwarteng successor Hunt (FT)
Big British firms in pension bailout storm (Daily Mail)
Truss U-turn on corporation tax will make recession more severe (Telegraph)