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☆ Sterling dips but heads for biggest monthly gain since mid-2020
▼ + stars: | 2022-10-31 | by ( Amanda Cooper | ) www.reuters.com time to read: +3 min

LONDON, Oct 31(Reuters) - Sterling fell on Monday, but was still headed for its largest monthly gain in over a year after the turbulence in British politics over the last few weeks finally appeared to subside. The Bank of England is likely to raise interest rates by another 75 basis points when it meets later this week. Hunt has ditched almost all the proposals in Truss's plan, returning a semblance of stability to UK markets and toning down a lot of the hawkishness around rate expectations. UK interest rates are currently expected to peak at around 4.87% in September next year, up from 2.25% right now. In the aftermath of Truss's so-called mini-budget, UK money markets showed traders expected rates to peak above 6% next September.

☆ Lula’s victory in Brazil sparks optimism on deforestation, with ramifications for the world
▼ + stars: | 2022-10-31 | by ( Jenni Reid | ) www.cnbc.com time to read: +7 min

Da Silva, commonly known as Lula, took 50.9% of the second round vote to incumbent Jair Bolsonaro's 49.1%, according to Brazil's election authority. watch nowLula used his victory address to pledge to combat climate change and deforestation — issues observers say have not just been sidelined but severely worsened under Bolsonaro's tenure. In 2019, he told foreign journalists: "No country in the world has the moral right to talk about the Amazon. "Around 95% of deforestation in the last four years in the Amazon has had some level of illegality," he said. Norway is already looking to resume aid for anti-deforestation efforts to Brazil, which it suspended during Bolsonaro's term, local newspaper Aftenposten reported Monday.

LONDON, Oct 27 (Reuters) - Germany, considered Europe's most reliable debtor, is having trouble selling its bonds, just as it seeks billions to tackle the energy crisis. Hit hard by its over-reliance on Russian energy, Germany intends to borrow particularly large amounts in the coming years, with Parliament last week voting to suspend the constitutional debt brake that limits new borrowing. France's finance agency, in contrast, issued 10 billion euros of medium term bonds on Oct. 20 into strong demand. VOLATILITY HURTS AUCTIONSThe uncertainty around borrowing and QT has increased volatility in euro zone bond markets, already rocked by the knock-on effects from Britain's now-scrapped plans for large unfunded tax cuts. Volatility is deterring the banks that act as dealers for German bonds from bidding in debt auctions, Tammo Diemer, head of the country's finance agency, said at an event on Tuesday.

☆ Western economies rediscover meaning of scarcity
▼ + stars: | 2022-10-27 | by ( Edward Chancellor | ) www.reuters.com time to read: +8 min

Western companies, which outsourced production to China and other emerging markets, found themselves less constrained by their domestic workforces. China’s rising exports lowered the prices of traded goods, dampening inflationary pressures and allowing Western central banks to cut interest rates to their lowest levels in history. In the 1970s, economists worried that fiscal deficits would lead to higher interest rates and lower investment. Western governments now face constraints that are common in developing countries, relating to fiscal policy, inflation and financial stability. To reduce the burden of their war debts, governments in Europe and the United States held interest rates below inflation.

☆ Aggressive rate hikes the name of the game for big central banks
▼ + stars: | 2022-10-27 | by ( ) www.reuters.com time to read: +5 min

LONDON, Oct 27 (Reuters) - The European Central Bank delivered a second straight 75-basis-point interest rate hike on Thursday, the latest sign that major central banks are serious about curbing hot inflation. Central banks in the 10 big developed economies have raised rates by a combined 2,165 basis points (bps) in this cycle to date, with Japan the holdout "dove." But the pace of these rate rises is starting to slow - Canada just delivered a smaller-than-anticipated rate hike. That would be the fourth straight rate increase of that magnitude, bringing the policy rate to the 3.75%-4.00% range as part of what has been the sharpest set of U.S. rate increases in about 40 years. Reuters Graphics7) SWEDENSweden's central bank raised its key rate on Sept. 20 by a larger-than-expected one percentage point to 1.75%.

LONDON, Oct 27 (Reuters) - Having hiked mortgage rates after political turmoil drove up the cost of borrowing, British banks are now cutting home loan prices, albeit slowly, as markets calm since Liz Truss's government collapsed and Rishi Sunak took power. But as markets have stabilised and borrowing costs have fallen, the trickle of mortgage rate cuts has lagged behind. By contrast, average rates on two-year and five-year fixed-rate mortgages have fallen just 0.16 percentage points, Moneyfacts data shows. Reuters GraphicsFIXED RATESMortgage brokers say fixed-rate mortgage rates typically lag changes in swap rates, a trend which could be exacerbated this time as lenders focus on reintroducing products. Five-year mortgage rates have followed a similar pattern, Moneyfacts data shows.

☆ U.K.'s Sunak face Parliament for the first time as prime minister
▼ + stars: | 2022-10-26 | by ( Associated Press | ) www.nbcnews.com time to read: +3 min

Rishi Sunak faced the opposition in Parliament for the first time as Britain’s prime minister Wednesday, seeking to provide assurances that his new government would offer economic stability and continuity after his predecessor’s tax plans triggered market tumult. He also quietly reinstituted a moratorium on fracking that was part of the Conservative Party’s 2019 election platform. “We will have to take difficult decisions to restore economic stability and confidence,” Sunak told the House of Commons. Sunak is seen by Conservatives as a safe pair of hands they hope can stabilize an economy sliding toward recession — and stem the party’s plunging popularity. Sunak brought in people from different wings of the Conservative Party for his Cabinet.

The British bank made a profit before tax of 2 billion pounds ($2.3 billion) in July-September, up from 1.9 billion a year ago and above analyst forecasts. European rival Deutsche Bank said fixed income trading revenues rose 38%. Barclays' advisory fees including merger and acquisitions (M&A) fell 45% in the third quarter to 533 million pounds. Despite the higher loan loss charge - including 381 million pounds taken in the quarter - Barclays' chief financial officer Anna Cross told reporters this had been taken ahead of time. Barclays said the net loss arising from the error over the year to date was 600 million pounds.

The British bank made a profit before tax of 2 billion pounds ($2.3 billion) in July-September, up from 1.9 billion pounds in the same period a year ago and above analysts' average forecast of 1.8 billion pounds compiled by the bank. Income in the fixed income, currencies and commodities business (FICC) doubled to 1.6 billion pounds from a year earlier as volatile markets saw heavy trading by clients. European rival Deutsche Bank saw fixed income trading revenues rise 38%. Barclays said the net loss arising from the error over the year to date was 600 million pounds. Barclays set aside 381 million pounds in the quarter to cover potentially soured loans – topping up its provisions for the year to 722 million – to reflect the deteriorating outlook.

Sunak, Britain’s third prime minister in seven weeks, took office on Tuesday with a pledge to fix the “mistakes” Truss made. Truss’ “mini” budget of September 23 crashed the pound and caused a rout in the bond market, sending UK borrowing costs — including mortgage rates — soaring. One area Sunak may be tempted to tap is the social welfare budget. That could save £7 billion ($8 billion) in 2023-24, according to the IFS, but would prove controversial. According to Hunt, the budget, when it comes, will set out how the government plans to reduce debt in the medium term.

"Policy stability is absolutely critical," Miles Celic, chief executive of finance lobby group TheCityUK told Reuters. Finance chiefs want Sunak to balance spending on infrastructure with easing immigration policy for skilled workers and investing in education, Celic added. Sunak confirmed on Tuesday that he was keeping Hunt as his finance minister, after he was appointed late in Truss' brief premiership to shore up confidence in Britain's finances - and tear up much of her planned tax-cutting agenda. Britain's 164 billion pound ($185 billion) financial industry was largely locked out of directly serving EU customers after Brexit. Any moves to extract more tax from banks are likely to be met with industry opposition.

☆ UK economy: Rishi Sunak only has unpleasant choices as prime minister
▼ + stars: | 2022-10-25 | by ( Julia Horowitz | ) edition.cnn.com time to read: +7 min

There’s little appetite for government spending cuts after years of austerity in the wake of the 2008 global financial crisis. Plus, failing to help households deal with surging living costs could prove politically devastating and further weigh on the economy. Finance minister Jeremy Hunt got the ball rolling last week when he reversed £32 billion ($37 billion) in tax cuts that formed the bedrock of Truss’ plan to boost growth. Risk of a ‘doom loop’Investors and economists expect that the government will announce a mixture of tax increases and spending cuts shortly. No one wants to repeat the errors of the brief Truss era, when her gamble that unfunded tax cuts would jumpstart growth backfired spectacularly.

LONDON, Oct 24 (Reuters) - Investors welcomed Rishi Sunak as Britain's new prime minister on Monday, but they're likely to give him little leeway to diverge from spending restraint and tax rises after his predecessor shook their faith in the Conservative party's management of the economy. Register now for FREE unlimited access to Reuters.com RegisterOutgoing Prime Minister Liz Truss's month and a half in power caused chaos in British financial markets. Yet Donovan said the mayhem of the last month means Sunak will have next to no room to make bold choices, lest he risk the market's wrath. And I don't think that the incoming prime minister has that." "The settling down of the situation in the UK means what is happening in politics is now more of an idiosyncratic thing just affecting UK markets, and in the UK too what global markets are doing will become more and more important."

☆ Political chaos tips British firms into deeper slide - PMIs
▼ + stars: | 2022-10-24 | by ( ) www.reuters.com time to read: +3 min

LONDON, Oct 24 (Reuters) - British businesses are suffering their worst month since January 2021, when they were under a COVID-19 lockdown, as the country's political upheavals compound concerns about inflation and rising interest rates, a survey showed on Monday. German business activity declined at a faster rate than in Britain, although France fared better than both. "More evidence of economic weakness, combined with signs of less heated inflationary pressures, should, all else equal, tone down the (BoE's) appetite to raise interest rates substantially in its November meeting," Beck said. Truss has said she will resign once her successor is chosen at the end of this week. "As night follows day, investment and employment will suffer in the months ahead as companies adjust to the increasingly challenging environment," Williamson said.

☆ Sovereign bond market turmoil to spill well into next year: Reuters poll
▼ + stars: | 2022-10-24 | by ( Hari Kishan | ) www.reuters.com time to read: +4 min

BENGALURU (Reuters) - Turmoil in global sovereign bond markets is set to persist for another six months to a year as central banks carry on raising interest rates to bring down inflation, according to a Reuters poll of market strategists. Since the Fed first moved, bond markets have been subjected to high levels of volatility and deep sell-offs, jolting many bond investors out of their complacency. Bond Market Option Volatility Estimate Index, which began rising late last year, hit its highest level since March 2020 last week. But those median forecasts were higher than in September’s poll, suggesting yields are still facing upside risks. The poll expected bund yields to drop slightly from their current levels to 2.10% by end-2022 and then rise slightly to stay around 2.20% in the following six months.

☆ Rishi Sunak offers only temporary fix for UK woes
▼ + stars: | 2022-10-24 | by ( George Hay | ) www.reuters.com time to read: +4 min

Now that Sunak has seen off an attempted return by wayward former Prime Minister Boris Johnson, yields are down to 3.7%. About 30 billion pounds of her 45 billion pounds of unfunded tax cuts have been already reversed, leaving a narrower 40 billion pound hole. But cheaper borrowing costs hastened by Sunak’s appointment should cut the gap to just 30 billion pounds, a UK budget expert told Breakingviews. Follow @gfhay on TwitterloadingCONTEXT NEWSFormer finance minister Rishi Sunak will become Britain's next prime minister after winning the race to lead the Conservative Party. Former prime minister and rival Boris Johnson withdrew from the contest saying he could no longer unite the party.

☆ VIEW Rishi Sunak to become Britain's new PM, UK markets rally
▼ + stars: | 2022-10-24 | by ( ) www.reuters.com time to read: +8 min

LONDON, Oct 24 (Reuters) - Former British finance minister Rishi Sunak will be Britain's next prime minister after his rivals quit the race, which analysts said had relieved some of the nervousness around the outlook for the UK economy, boosting domestic markets. The new Prime Minister needs to confirm their leadership team as soon as possible and provide clarity on their strategy for stabilising the economy and their policy priorities. ART HOGAN, CHIEF MARKET STRATEGIST, B. RILEY WEALTH, NEW YORK:"Coming to a very rapid decision on who the prime minister is going be certainly breathes a sigh of relief into the markets. RUTH GREGORY, SENIOR UK ECONOMIST, CAPITAL ECONOMICS, LONDON:"The fall in gilt yields on the news today that Rishi Sunak will become the UK’s next Prime Minister has reduced the chances of a significant fiscal consolidation. With the pound, just because we have a new Prime Minister in place, all of the issues don't just go away and we still have remarkable strength being enjoyed by the dollar."

☆ Cost of insuring UK debt against default drops as Sunak becomes PM
▼ + stars: | 2022-10-24 | by ( ) www.reuters.com time to read: +1 min

LONDON, Oct 24 (Reuters) - The cost of insuring Britain's debt against default fell to its lowest since last month's "mini budget", according to data from S&P Global Market Intelligence on Monday, after Rishi Sunak won the race to become Britain's next prime minister. Five-year sovereign credit default swaps (CDS) on UK government debt fell to 30 basis points, from 35 bps at Friday's close. This was their lowest since Sept. 23, when outgoing Prime Minister Liz Truss and her then-finance minister Kwasi Kwarteng unveiled a fiscal plan that contained billions of pounds in unfunded tax cuts. Sunak, who served as finance minster under Boris Johnson, said on Monday Britain faced serious economic challenges and needed stability and unity. Register now for FREE unlimited access to Reuters.com RegisterReporting by Amanda Cooper; Editing by Karin StroheckerOur Standards: The Thomson Reuters Trust Principles.

☆ Sterling supported by expectations Rishi Sunak will become prime minister
▼ + stars: | 2022-10-24 | by ( Alun John | ) www.reuters.com time to read: +2 min

LONDON Oct 24 (Reuters) - Sterling strengthened on Monday finding short term relief from the likelihood that former finance minister Rishi Sunak would become Britain's next prime minister after Boris Johnson quit the race. It rose as far as $1.1402 in Asian trading before paring gains to hold just inside positive territory at $1.1323. Former prime minister Boris Johnson had raced home from a holiday to see if he could enter the ballot. The so-called 'mini budget' also ultimately led to the removal of Truss as Prime Minister. Register now for FREE unlimited access to Reuters.com RegisterReporting by Alun John; Editing by Kirsten DonovanOur Standards: The Thomson Reuters Trust Principles.

Like Truss, Sunak promised a tough approach to illegal immigration and vowed to expand the government’s controversial Rwanda immigration policy. At the time Johnson was running to lead Britain's Conservative Party and Sunak was a member of Parliament. Danny Lawson/PA Images/Getty Images Sunak speaks during a general election debate in Cardiff, Wales, in November 2019. Danny Lawson/PA/Getty Images Sunak delivers a speech during the annual Conservative Party Conference in Manchester in October 2021. Hollie Adams/Bloomberg/Getty Images Sunak and Murty are seen with their daughters, Krishna and Anoushka, while campaigning in Grantham, England, in July 2022.

☆ Factbox: What is Rishi Sunak's solution to Britain's problems?
▼ + stars: | 2022-10-24 | by ( ) www.reuters.com time to read: +5 min

Although some of the challenges have changed since then, what does that campaign tell us about how he would govern? ECONOMIC CHALLENGESRegister now for FREE unlimited access to Reuters.com RegisterBritain is facing an economically toxic combination of recession and rising interest rates. The Bank of England is trying to tame double-digit inflation while consumers face rising costs and falling real incomes. ECONOMIC POLICIESIn a statement issued on Sunday announcing his candidacy, Sunak said the country faced a "profound economic crisis". He also refused to rule out Britain's withdrawal from the European Court of Human Rights.

☆ Rishi Sunak to be Britain's new prime minister as rival Penny Mordaunt drops out
▼ + stars: | 2022-10-24 | by ( Karen Gilchrist | ) www.cnbc.com time to read: +1 min

Rishi Sunak has been named as the U.K.'s new prime minister, after beating competitor Penny Mordaunt in the country's fast-tracked leadership race. Hollie Adams | Getty Images News | Getty ImagesLONDON — Rishi Sunak will be named the U.K.'s new prime minister, following a fast-tracked Conservative Party leadership race initiated to fill the void left by Liz Truss' resignation. The 42-year-old takes over just seven weeks after placing second to Truss, who stepped down Thursday, bringing to a swift close her 44 days in office — the shortest tenure of any U.K. prime minister. Sunak, who is credited with steering the U.K. economy through the height of the Covid-19 pandemic, is broadly seen as a safe pair of fiscal hands. Indeed, after being berated by Truss during the race as a voice of Treasury orthodoxy, his critique of the PM's "unfunded tax cuts" appears to have been vindicated.

☆ Factbox: Conservative leadership race: who will replace Liz Truss as UK prime minister?
▼ + stars: | 2022-10-21 | by ( Kate Holton | ) www.reuters.com time to read: +4 min

LONDON, Oct 21 (Reuters) - A fast-tracked Conservative Party leadership election is underway to replace Liz Truss, who said on Thursday she would resign just six weeks after being appointed as British prime minister. If the person in second place does not drop out, then the Conservative Party membership will vote, with results announced by Friday. BORIS JOHNSONFormer prime minister Johnson, a journalist, has loomed large over British politics ever since he became London Mayor in 2008. Conservative lawmakers said Johnson, who has been on holiday in the Caribbean, could stand in the leadership contest and was taking soundings. Wallace, a former soldier, was defence minister for both Johnson and Truss, leading Britain's response to Russia's invasion of Ukraine.

☆ 3 charts showing the market turmoil wreaked during UK PM Liz Truss’ tenure
▼ + stars: | 2022-10-21 | by ( Hannah Ward-Glenton | ) www.cnbc.com time to read: +3 min

Dan Kitwood | Getty Images News | Getty ImagesLONDON — U.K. Prime Minister Liz Truss was in office for just 44 days before she announced her resignation on Thursday. Her time as leader may have been short, but the impact her tenure had on the British economy was huge. Here are three charts showing how markets behaved during Truss' brief time at 10 Downing Street. Soaring gilt yields Yields on U.K. government bonds – known as gilts – soared after the government announced its mini-budget, which means that prices have crashed as bond yields move inversely to prices. Gilt yields fell as Liz Truss delivered her resignation speech but they flattened out later in the day.

☆ It would be a 'real mistake' to assume other countries will avoid UK-like turmoil, and the US must watch its fiscal issues, former Treasury Secretary Larry Summers says
▼ + stars: | 2022-10-21 | by ( Jennifer Sor | ) www.businessinsider.com time to read: +2 min

Other nations could see the same market turmoil that played out in the UK, ex-Treasury Secretary Larry Summers warned. He pointed to the risk of a "doom loop" created by unsustainable deficits and rapidly rising interest rates. "Things can change extraordinarily fast if you lose credibility," Summers said in an interview with Bloomberg TV. Summers also noted liquidity issues in the market which could eventually lead to a situation where there are more sellers than buyers. "The fiscal issues need, sooner or later, to be back on the table in the United States."

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