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☆ Sterling sinks to new low as 'mini budget' hits investor faith in UK markets
▼ + stars: | 2022-09-26 | by ( Amanda Cooper | ) www.reuters.com time to read: +4 min

read moreOn Friday, he announced that he would cut a raft of taxes, but he did not detail how the government would fund it. , read moreIn light of the rout, strategists and economists said the Bank of England needs to do something to calm markets and restore credibility. The FTSE 100 (.FTSE) was roughly flat on the day, while the domestically focussed FTSE 250 (.FTMC) fell 1%. '1980S ON STEROIDS'Paul Dales, Capital Economics chief UK economist, said the central bank needed to take action. "The market is now treating the UK as if it's an emerging market.

☆ Britain’s Sketchy Growth Plan Is Scarier Than Its Bond Vigilantes
▼ + stars: | 2022-09-26 | by ( Jon Sindreu | ) www.wsj.com time to read: +1 min

A big selloff in gilts points to worries about too much supply, and to the possibility that the BOE could raise borrowing costs even faster than expected. The expansive, expensive economic policy of new U.K. Prime Minister Liz Truss has revived fears of “bond vigilantes.” But the turmoil in financial markets may have more to do with the plan’s unclear return on investment than its hefty borrowing requirements. On Monday, sterling dropped to a record low against the U.S. dollar in overnight trading before rebounding slightly. Investors already expected Ms. Truss’s new government to spend north of £150 billion, equivalent to $163 billion, to freeze energy bills, but on Friday her Treasury chief, Kwasi Kwarteng , paired this with the most sweeping tax cuts since 1972, according to the independent Institute for Fiscal Studies, as well as totemic measures such as scrapping a cap on bankers’ bonuses. The total package will cost £291 billion, or a colossal 12.6% of gross domestic product, over the next five years, according to estimates by UBS economist Anna Titareva .

☆ Morning Bid: "Our currency" and falling knives
▼ + stars: | 2022-09-26 | by ( ) www.reuters.com time to read: +2 min

People walk past a currency exchange point, showing an image of the U.S. dollar in Cairo, Egypt, March 22, 2022. "The dollar is our currency, but it's your problem," John Connally told his G10 counterparts in November, 1971. The UK's market mayhem is front and center for world markets, but has a particular impact on Asia via FX reserves. Some $625 billion global FX reserves are in sterling, most of it probably in gilts. Global financial conditions are the tightest now since 2009, according to Goldman Sachs.

☆ Pound tanking, massive tax cuts and talk of emergency hikes. Here's what's going on in the UK
▼ + stars: | 2022-09-26 | by ( Elliot Smith | ) www.cnbc.com time to read: +6 min

Jim O'Neill, former Goldman Sachs Asset Management chairman and a former U.K. Treasury minister, said the pound's fall shouldn't be misinterpreted as dollar strength. The announcement Friday featured a volume of tax cuts not seen in Britain since 1972 and an unabashed return to the "trickle-down economics" promoted by the likes of Ronald Reagan and Margaret Thatcher. The radical policy moves set the U.K. at odds with most major global economies against a backdrop of sky-high inflation and a cost-of-living crisis. Ibrahim added that this would imply further suffering for U.K. financial markets due to the "unfavorable policy mix" over the near term. The British lender expects the government to clarify its plans to balance the books through "spending cuts and reform outcomes" ahead of the November budget statement, which Montagne suggested "should help to deflect immediate concerns relating to large unfunded tax cuts."

☆ UK gilts on track for biggest loss since at least 1957: Reuters analysis
▼ + stars: | 2022-09-26 | by ( ) www.reuters.com time to read: +1 min

City workers walk past the Bank of England in the City of London, Britain, March 29, 2016. REUTERS/Toby Melville/File PhotoLONDON, Sept 26 (Reuters) - British government bond prices are on track for their biggest slump of any calendar month since at least 1957, according to a Reuters analysis of Refinitiv and Bank of England data. The previous record was in September 1986, which saw a rise of 126 basis points. The jump in yields is also greater than any monthly move in the BoE's series for 10-year British government stock that runs from 1957 to 1970. Register now for FREE unlimited access to Reuters.com RegisterReporting by Andy Bruce; editing by David MillikenOur Standards: The Thomson Reuters Trust Principles.

☆ Morning Bid: Pounded
▼ + stars: | 2022-09-26 | by ( ) www.reuters.com time to read: +2 min

Pound and U.S. dollar banknotes are seen in this illustration taken January 6, 2020. On Friday, gilts suffered their heaviest selling in decades, and before that, the yen and U.S. interest rate futures have been roiled. Global tension is also mounting over the war in Ukraine, as Russia holds widely-criticised votes aimed at annexing territory it has taken by force. Besides sterling, Asian stock markets fell on Monday. European futures fell 0.3% and S&P 500 futures fell 0.6%.

☆ Sterling collapses as investors fly into dollars
▼ + stars: | 2022-09-26 | by ( Tom Westbrook | ) www.reuters.com time to read: +3 min

British Pound Sterling and U.S. Dollar notes are seen in this June 22, 2017 illustration photo. Register now for FREE unlimited access to Reuters.com Register"You've got to buy the dollar as a risk off-trade. In stocks, MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was down 1% to a two-year low. Treasuries tanked as well last week, with two-year yields up 35 bps to 4.2140% and benchmark 10-year yields up 25 bps to 3.6970%. Gold hit a more-than two-year low on Friday and bought $1,643 an ounce on Monday.

☆ Euro zone yields at multi-year highs, Italian bonds underperform
▼ + stars: | 2022-09-26 | by ( Stefano Rebaudo | ) www.reuters.com time to read: +4 min

Register now for FREE unlimited access to Reuters.com RegisterSept 26 (Reuters) - Euro zone government bond yields jumped to multi-year highs amid expectations that central banks will keep tightening their monetary policy despite recession risks and a new sell-off in British gilts. Meanwhile, the spread between Italian and German yields widened after the rightist coalition won a clear majority in Sunday's elections. Italian bond (BTP) prices are also more susceptible to shifts in interest rate expectations, given the country's vast debt burden. Giorgia Meloni looks set to become Italy's first woman prime minister at the head of its most right-wing government since World War Two. "Bond yields across Europe are correlated, and today's jump in Britain yields is again affecting the euro area," he added.

☆ Reactions: Britain's pound crumbles to record lows in firesale of UK assets
▼ + stars: | 2022-09-26 | by ( ) www.reuters.com time to read: +8 min

Wads of British Pound Sterling banknotes are stacked in piles at the Money Service Austria company's headquarters in Vienna, Austria, November 16, 2017. REUTERS/Leonhard Foeger/File PhotoLONDON, Sept 26 (Reuters) - Britain's pound plunged to record lows on Monday and bonds were slammed for a second day, as investors punished UK assets after the government's mini-budget announcement last week. The presentation of the mini-budget was received quite badly by the markets – sterling literally collapsed. The significant tax cuts announced by the Treasury Secretary cause concerns for the currency markets because of rising government debt." One is the loss of confidence in UK fiscal policy and that won't help sterling.

☆ Dollar stands alone as rate hikes rattle stocks
▼ + stars: | 2022-09-25 | by ( Tom Westbrook | ) www.reuters.com time to read: +3 min

S&P 500 futures were flat after an initial wobble lower. The dollar made new highs on sterling, the euro and the Aussie in thin morning trade. Last week, stocks and bonds crumbled after the United States and half a dozen other countries raised rates and projected pain ahead. Register now for FREE unlimited access to Reuters.com RegisterThe Nasdaq (.IXIC) lost more than 5% for the second week running. Oil and gold steadied after drops against the rising dollar last week.

REUTERS/Kim Kyung-Hoon/File PhotoNEW YORK/LONDON, Sept 25 (Reuters) - Global investors are preparing for more market mayhem after a monumental week that whipsawed asset prices around the world, as central banks and governments ramped up their fight against inflation. "It's hard to know what will break where, and when," said Mike Kelly, head of multi-asset at PineBridge Investments (US). "Currency exchange rates ... are now violent in their moves," said David Kotok, chairman and chief investment officer at Cumberland Advisors. But the murky outlook meant that they were still not cheap enough for some investors. "We are of the view that markets are still massively underestimating the global economic growth hit that is coming," he said.

REUTERS/Kim Kyung-Hoon/File PhotoNEW YORK/LONDON, Sept 25 (Reuters) - Global investors are preparing for more market mayhem after a monumental week that whipsawed asset prices around the world, as central banks and governments ramped up their fight against inflation. "It's hard to know what will break where, and when," said Mike Kelly, head of multi-asset at PineBridge Investments (US). "Currency exchange rates ... are now violent in their moves," said David Kotok, chairman and chief investment officer at Cumberland Advisors. The fallout from the hectic week exacerbated trends for stocks and bonds that have been in place all year, pushing down prices for both asset classes. "We are of the view that markets are still massively underestimating the global economic growth hit that is coming," he said.

☆ UK market meltdown? Nothing to see here, minister says
▼ + stars: | 2022-09-24 | by ( ) www.reuters.com time to read: +2 min

Chief Secretary to the Treasury Chris Philp walks outside Treasury building, in London, Britain September 7, 2022. REUTERS/Hannah MckayLONDON, Sept 24 (Reuters) - Britain's deputy finance minister on Saturday played down a historic collapse in the pound and government bonds in response to the country's new economic growth plan, which sent international investors heading for the exit. The pound slumped 3.6% on Friday below $1.09, a new 37-year low against the dollar, while gilts suffered their worst day in decades as the market digested finance minister Kwasi Kwarteng's announcement of a borrowing-funded drive for growth. "Let's be clear, the interest rates payable on government gilts is about the same in the United Kingdom now today as it is in the United States," Chris Philp, Britain's deputy finance minister, told Sky News when asked about the market moves. "(The reason) we're doing this isn't for intraday moves in the currency market, Philp said.

☆ UK market meltdown? Nothing to see here, Treasury minister says
▼ + stars: | 2022-09-24 | by ( ) www.reuters.com time to read: +2 min

Chief Secretary to the Treasury Chris Philp walks outside Treasury building, in London, Britain September 7, 2022. REUTERS/Hannah MckayLONDON, Sept 24 (Reuters) - Britain's deputy finance minister on Saturday played down a historic collapse in the pound and government bonds in response to the country's new economic growth plan, which sent international investors heading for the exit. The pound slumped 3.6% on Friday below $1.09, a new 37-year low against the dollar, while gilts suffered their worst day in decades as the market digested finance minister Kwasi Kwarteng's announcement of a borrowing-funded drive for growth. "(The reason) we're doing this isn't for intraday moves in the currency market, Philp said. Register now for FREE unlimited access to Reuters.com RegisterReporting by Andy Bruce Editing by Frances KerryOur Standards: The Thomson Reuters Trust Principles.

☆ Reactions: Britain's finance minister unveils "mini budget"
▼ + stars: | 2022-09-23 | by ( ) www.reuters.com time to read: +5 min

Britain's blue-chip stocks (.FTSE)remained mired in the red, in line with a broader equity-market decline. FOREX: Sterling extended losses, falling 1.9% on the day to around $1.1047, having hit a new 37-year low earlier on. British homebuilders and household goods makers hit session highs, buoyed by the prospect of consumers getting tax breaks. The tax-cutting budget and ‘go for broke’ growth aims are unlikely to change the longer-term bearish GBP trend." If you get more fiscal stimulus and less monetary stimulus, that’s something that’s buoyant for the currency.

☆ Morning Bid: After manic week, TGIF
▼ + stars: | 2022-09-23 | by ( ) www.reuters.com time to read: +2 min

Guest walk on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., September 22, 2022. REUTERS/Brendan McDermidRegister now for FREE unlimited access to Reuters.com RegisterA look at the day ahead in European and global markets from Anshuman DagaFriday is shaping up as a slow day. Equity markets are still licking their wounds, U.S. bond yields are at 11-year highs and the dollar is hovering near a two-decade peak. Register now for FREE unlimited access to Reuters.com RegisterStill, investors have probably had enough this week, with the Fed raising rates by 75 basis points as expected but jolting markets with a sobering outlook. read moreA host of central banks including the UK, Swiss and Norwegian raised interest rates this week, providing no signs that borrowing costs are nearing a peak.

☆ Bonds lead losses as rate hikes hit; yen in focus
▼ + stars: | 2022-09-23 | by ( Tom Westbrook | ) www.reuters.com time to read: +4 min

World stocks (.MIWD00000PUS) hit two-year lows on Thursday and are down 3% this week. "The 10-year was playing catch up to the newly calibrated cash rate," said Westpac's head of rates strategy, Damien McColough, in Sydney. I think that this volatility continues in all markets in the near term (until) the rates market settles." The euro was last at $0.9844, a fraction over Thursday's 20-year trough at $0.9807 -- although all eyes are on the yen. In commodity markets oil is eying a small weekly loss as rate hikes raise demand concerns.

☆ From the Fed to Europe's currency crisis, here's what's behind this selloff in financial markets
▼ + stars: | 2022-09-23 | by ( Patti Domm | In | ) www.cnbc.com time to read: +4 min

"It's clear the economy is slowing yet inflation is ramping and the central bank is compelled to address it. Fed Chairman Jerome Powell steadfastly warned the Fed will do what it needs to do to crush inflation. Arone said around the globe, the common threads are slowing economies and high inflation with central banks engaged to curb high prices. Strategists say the U.S. central bank particularly rattled markets by forecasting a new higher interest rate forecast, for the level where it believes it will stop hiking. The Fed's projected 4.6% high water rate for next year is considered to be its "terminal rate," or end rate.

Finance minister Kwasi Kwarteng's plans will require an extra 72 billion pounds ($79 billion) of government borrowing over the next six months alone, and - a particular concern for investors - cement permanent tax cuts costing 45 billion pounds a year. But to bond investors, they bring the prospect of more persistent inflationary pressures - at a time when inflation is already near a 40-year high - as well as tighter Bank of England (BoE) policy. Government borrowing is likely to total 218 billion pounds this financial year and 229 billion pounds in 2023/24, Citi predicted, and it expects benchmark 10-year British government bond yields to rise to 4.25%. Adding to the pressure, on Thursday the BoE confirmed it planned to reduce its own 838 billion pounds of gilt holdings by 80 billion pounds over the coming year. "That is a strong indication that domestic and overseas investors are losing confidence in the UK's inflation-fighting credibility," he said.

☆ UK gilts suffer biggest collapse since March 2020 meltdown
▼ + stars: | 2022-09-22 | by ( ) www.reuters.com time to read: +3 min

read moreThe potential scale of additional government borrowing implied by Truss's plans has undermined investor confidence in gilts over the last month. And it just keeps on looking like spend, spend, spend; borrow, borrow, borrow," Ostwald said. read moreThe gap between 10-year British and German benchmark bond yields touched 156.4 basis points on Thursday, the highest since 2015. The 10-year gilt yield has risen 70 bps in September so far, following a 94 bps increase in August that had been the biggest in 36 years. Taking August and September thus far together, the increase in yield would be the largest since October and November 1979, according to Refinitiv data.

☆ The Cure? Cut Taxes and Spending
▼ + stars: | 2022-09-16 | by ( Andy Kessler | ) www.wsj.com time to read: +1 min

A 45-day period will forever be known as a “Truss” for Liz Truss ’s tenure before resigning as British prime minister, much as 11 days is a “Mooch” for Anthony Scaramucci ’s short stint in the Trump administration. Come to think of it, a “Biden” is 208 days, the time from Inauguration Day until the fall of Kabul after the Afghanistan scram in August 2021. President Biden has been a bit of a lame duck ever since, and if polls are right, even more so after Tuesday’s elections. Unknown to many, U.K. pension funds had been hedging against interest rate increases, using derivatives with six or seven times leverage. As inflation hit 10.1%, interest rates were going up no matter what, which caused funds to dump gilts, or bonds, to pay their margin calls, crushing the currency.

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