Closing post
Time to recap….
The governor of the Bank of England, Andrew Bailey, has warned recent events in US private credit markets have worrying echoes of the sub-prime mortgage crisis that kicked off the global financial crash of 2008.
Appearing before a House of Lords committee, the governor said it was important to have the “drains up” and analyse the collapse of two leveraged US firms, First Brands and Tricolor, in case they were not isolated events but “the canary in the coalmine”.
Bailey warned:
“Are they telling us something more fundamental about the private finance, private asset, private credit, private equity sector, or are they telling us that in any of these worlds there will be idiosyncratic cases that go wrong?”
“I think that is still a very open question; it’s an open question in the US.”
He added:
“I don’t want to sound too foreboding, but the added reason this question is important is if you go back to before the financial crisis when we were having this debate about sub-prime mortgages in the US, people were telling us: ‘No it’s too small to be systemic; it’s idiosyncratic.’
That was the wrong call.”
Gold prices have tumbled by more than 5% today, set for their biggest daily drop for more than five years. Analysts blamed profit-taking, and the easing of US-China trade tensions, for the sell-off.
UK government borrowing was the highest for five years in September after rising debt interest costs and higher welfare payments pushed the public finances deeper into the red.
Rachel Reeves has blamed a heavier than anticipated blow from Brexit and austerity for forcing her to take action to balance the books at next month’s autumn budget.
And in other news:
On gold, David Morrison, senior market analyst at Trade Nation, says:
It has been a long time coming, but it looks as if gold is finally having a bit of a downside correction following its record-breaking upside run.
Gold had several attempts to push above $4,400, starting last Thursday. But on each occasion, it ran into resistance around $4,380. That is pretty much what happened this morning. The big question for investors and traders alike is if this the start of a much-needed correction?
But, after its recent parabolic surge, could the top be in for gold?
Morrison says it’s very difficult to know, adding:
Analyst speculation will centre around the shape and extent of this sell-off, as well as giving some consideration as to how long this rally has been going. If you trace it back to the lows hit this time in 2023, then the rally is relatively young. But if you go back to the lows of 2015 as your starting point, it all looks a bit different. The first major test to the downside comes in around $4,000.
But it’s also quite possible that this is all we get from the dip, and that buyers come back in around $4,200. It’s really a question of having some patience to see how the situation progresses from here.
Updated
