Closing summary
More than two-fifths of Britain’s mortgage deals have been withdrawn since last Friday’s mini-budget, which brought chaos to the market. Kwasi Kwarteng’s package of £45bn of unfunded tax cuts and likely borrowing binge sent the yields on government bonds soaring and raised expectations that the Bank of England will be forced to raise its base rate to 6% by next summer. Experts have warned that house prices could crash up to 20% next year.
The prime minister, Liz Truss, and the Treasury’s no 2, Chris Philp, both did a round of broadcast interviews this morning to defend their economic plans, but their comments have failed to restore investor confidence. The pound has now recovered in volatile trading but stocks have sold off and government bond yields are rising again, increasing government borrowing costs.
The former governor of the Bank of England Mark Carney has accused Liz Truss’s government of “undercutting” the country’s economic institutions and working at “cross purposes” with Threadneedle Street.
Our other main stories today:
Next’s chief executive has warned the UK could be heading for a second cost of living crisis next year as the slump in the value of the pound drives further price rises.
Thank you for reading. We’ll be back tomorrow. – JK
Updated
Pound recovers, Wall Street slides
Wall Street has opened lower, with the tech-heavy Nasdaq tumbling 2% and the Dow Jones losing 1.1%, as investors fret about the global economic outlook.
US GDP fell 0.6% in the second quarter, as expected, the final estimate confirmed.
The pound has staged a recovery against the dollar, reversing earlier losses, and is now trading 0.78% higher at $1.0975, while the euro is flat against the dollar at $0.9728.
Stock markets in Europe are still deep in the red. The UK’s FTSE 100 index has lost nearly 2% and has fallen 136 points to 6,867, while Germany’s Dax has fallen 1.5%, France’s CAC has slid 1.3% and Italy’s FTSE MiB has tumbled 2.6%.
UK government bond yields have risen again today, after yesterday’s emergency intervention by the Bank of England to stabilise the bond market led to a sharp drop in yields. The yield on the benchmark 10-year gilt is up 12 basis points to 14.13% while the 30-year yield is at 3.9% – after rising to 5.5% before the Bank’s intervention on Wednesday.
