Closing summary
What a day…what a week!
The pound had slipped 0.5% this morning, then fell 1.2% after Kwasi Kwarteng was sacked as chancellor, as markets don’t like uncertainty. He had dashed back from the IMF meeting in Washington a day early, and Hargreaves Lansdown analyst Susannah Street quipped: “Kwasi Kwarteng straight from arrivals to departures”.
The pound clawed back some losses on news of Jeremy Hunt’s appointment as chancellor, only to sell off again after Liz Truss spoke, as she failed to give the reassurances that markets and the public were looking for. The pound is now 1% lower against the dollar at $1.1207.
Government bonds rallied this morning on expectations of a government U-turn on corporation tax, which later materialised. This pushed yields sharply lower, but the rally faded after the prime minister spoke. Her performance at her brief press conference failed to impress investors, and the 10-year and 30-year yield have since ticked up again. It’s also the last day of the Bank of England’s emergency bond-buying programme, which is due to end at 4.30pm.
The FTSE rally has also petered out, partly because Wall Street banks have reported disappointing results, dragging down US indices. The UK bluechip index is trading just 25 points higher at 6,875, a 0.36% gain, after rising more than 1% earlier. Truss’s press conference only lasted eight minutes, she took just four questions and didn’t really answer the ones about why she should stay on as prime minister.
Our other main stories today:
Thank you for reading. Have a great weekend. We’ll be back next week. Take care – JK
Updated
Michael Hewson, chief market analyst at CMC Markets UK, has summed up this week.
European markets look set to end a turbulent week very much on the up, although we are slipping off the highs of the day, and while the Dax looks set to finish higher for the second week in a row, the FTSE 100 has had a much more difficult week.
The task for the FTSE 100 has been much harder, having hit a 20-month low yesterday, the UK index did look as if it might be able to reverse most of this week’s losses, however that prospect disappeared after the confirmation of the latest UK government U-turn, and the latest 1-year inflation expectations survey for the University of Michigan surged to 5.1% in October, serving to also pull US markets sharply lower.
This week’s volatility in UK bond markets has had a significant effect on the FTSE 100 with wild swings in house builders, consumer staples and banks.
These moves have been driven by the sharp rise and fall in gilt yields, with the sharp moves lower in yields over the last 24 hours helping to pull these sectors off their lows, although today’s price action has been more subdued.
Weighing on the FTSE 100 this afternoon has been weakness in energy and basic resources with concerns over recession acting as a drag on commodity prices.
