MIDDAY UPDATE – The FTSE 100 index was down 0.1%, and the FTSE 250 down 0.3% at midday, as Sterling rallied after its plunge on Monday.
In morning trading, Sterling rose 1.1% to $1.079.
Victoria Scholar of Interactive Investor said, “The pound is attempting to recover some lost ground after yesterday’s plunge thanks to US dollar profit taking and a sense that Monday’s knee-jerk sell-off was overdone. Although GBP-USD is trading back up around USD1.08, the currency pair is still down 20% year-to-date underpinned by strong demand for the greenback and a lack of international investor confidence in the UK’s economic outlook and its policymakers.”
MORNING REPORT – London’s FTSE 100 index closed the day 0.03% up, and the FTSE 250 ended up 1.39% down after a tumultuous day of trading overshadowed by the collapsing pound. A slight rally in the FTSE 100 didn’t last through the day, as investors were spooked by talk of an emergency interest rate hike by the Bank of England.
Sterling hit its lowest level since the British Pound went decimal in 1971, falling to 1.03 dollars in Asian trading, before a slight rebound to 1.09 dollars.
In a statement after the pound’s plunge, the Bank of England’s Governor Andrew Bailey said, “The Bank is monitoring developments in financial markets very closely in light of the significant repricing of financial assets. The MPC will not hesitate to change interest rates by as much as needed to return inflation to the 2% target sustainably in the medium term, in line with its remit.”
Chancellor Kwasi Kwarteng attempted to calm markets with a promise of a Medium-Term Fiscal Plan to rein in Government borrowing.
In a statement, he said, “The Fiscal Plan will set out further details on the government’s fiscal rules, including ensuring that debt falls as a share of GDP in the medium-term.”
Housebuilders took a beating as investors feared a stark rise in mortgage rates next year, with Barratt (GB:BDEV) down 4.5%.
British business news today
Economic consensus is crumbling but the Bank of England has not got the memo (FT)
Cities outside London lagging those in former East Germany (Times)
Mortgage payments to surge by almost £10,000 if interest rates hit 6% (Telegraph)