MIDDAY UPDATE The FTSE 100 index was down 0.4% at midday, after slumping 2% previously, and the FTSE 250 index was down 0.6%.
In another day of financial turmoil in the UK, the Bank of England stepped in to buy long-term government debt amid the continuing financial meltdown sparked by Kwasi Kwarteng’s ‘mini-budget’.
The Bank said it would step in for ‘temporary and targeted purchases in the gilt market’ due to risks to Britain’s ‘financial stability’.
Bond markets recovered in the wake of the announcement, but the Pound fell once again, dropping by around 1.6% in midday trading.
MORNING UPDATE London’s FTSE 100 index was down 0.5%, while the FTSE 250 fell 2.4% in trading yesterday, amid fears that the Bank of England would deliver a significant rise in interest rates next month.
The Bank of England’s chief economist Huw Pill said that the Bank’s Monetary Policy Committee would wait until November 3 to assess the full impact of Kwasi Kwarteng’s ‘mini-budget’, but said, “In the context of the rebalancing of the market environment and in anticipation of looser fiscal policy, it is hard not to conclude that this will require a significant monetary policy response.”
“The Bank has a very big interest and responsibility for maintaining orderly and well-functioning market operation across a variety of asset prices … My colleagues take that responsibility very seriously,” Pill said.
Speaking to an audience of bankers, Pill said that the Bank’s policy was not meant to “fine-tune short-term developments” in markets.
Meanwhile, the International Monetary Fund (IMF) urged the Government to “re-evaluate” its planned tax cuts, warning that the “untargeted” package threatens to stoke inflation in Britain.
Mining shares rose on news of relaxations of COVID-19 restrictions in China, with Glencore (GB:GLEN) up 3.53%.
Insurance and travel company Saga’s shares (GB:SAGA) plunged after a warning that its profits this year would be lower due to shrinking margins, as the company wrote down the value of its insurance division by £269 million.
British business news today
Jump in mortgage rates threatens UK property price crash (FT)
Liz Truss must choose between fiscal U-turn or property price crash (Telegraph)
Pension fund crisis as gilt yields climb (Times)