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☆ Markets hate Liz Truss' plan for the UK. Just look at these charts
▼ + stars: | 2022-09-23 | by ( Julia Horowitz | Cnn Business | ) edition.cnn.com time to read: +1 min

London (CNN Business) When the UK government, led by new Prime Minister Liz Truss, unveiled its plan to rescue the British economy on Friday, the reaction from investors was instantaneous: They hated it. The British pound crashed below $1.10 by mid-afternoon, hitting a new 37-year low against the greenback. The yield on the benchmark 10-year UK government bond, which moves opposite prices, leaped by a quarter percentage point — a very large move in the world of bond trading. UK stocks, as measured by thein London, hit their lowest level since March. Finance Minister Kwasi Kwarteng said the government would cut personal income taxes and cancel plans to raise business taxes next spring, calling for a "new approach for a new era, focused on growth."

☆ Bank of England needs to hike rates next week to calm markets, Deutsche Bank analyst says
▼ + stars: | 2022-09-23 | by ( ) www.reuters.com time to read: +1 min

A general view of the Bank of England (BoE) building, the BoE confirmed to raise interest rates to 1.75%, in London, Britain, August 4, 2022. REUTERS/Maja SmiejkowskaLONDON, Sept 23 (Reuters) - Britain's central bank needs to make a big inter-meeting interest rate hike as early as next week to calm markets and restore credibility, a Deutsche Bank analyst said on Friday. In a research note, Deutsche Bank's George Saravelos said the required policy response was clear: "A large, inter-meeting rate hike from the Bank of England as soon as next week to regain credibility with the market." A decision by the BoE to reverse its planned sale of UK government bonds would make matters worse, he said. Register now for FREE unlimited access to Reuters.com RegisterReporting by Dhara Ranasinghe Editing by Tommy Reggiori WilkesOur Standards: The Thomson Reuters Trust Principles.

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.

☆ The curious case of falling gold prices
▼ + stars: | 2022-09-23 | by ( Julia Horowitz | Cnn Business | ) edition.cnn.com time to read: +7 min

But gold prices haven't surged. "Investors don't have much appetite to hold gold in the current environment," Warren Patterson, head of commodities strategy at ING, told me. Breaking it down: Gold prices skyrocketed in early March as fears about the consequences of Russia's invasion of Ukraine mounted. A stronger currency makes it more expensive for foreign investors to buy in, and can reduce demand, pushing down prices. In the meantime, Costco plans to leverage its size to stay competitive on prices and keep growing sales.

☆ UK finance minister Kwarteng's radical tax-cutting statement
▼ + stars: | 2022-09-23 | by ( ) www.reuters.com time to read: +3 min

They will have heard reports that their already-expensive energy bills could reach as high as 6,500 pounds ($7,253) next year. The prime minister has acted with great speed to announce one of the most significant interventions the British state has ever made." BANKS SHOULD PAY TAXES IN LONDON, NOT PARIS OR NEW YORK"We need global banks to create jobs here, invest here and pay taxes here in London, not Paris, not Frankfurt, not New York. TAX CENTRAL TO SOLVING GROWTH RIDDLE"We come to tax -- central to solving the riddle of growth. And the higher the tax, the more ways people seek to avoid them, or work elsewhere or simply work less ... rather than putting their time and money to more creative and productive ends."

☆ Premarket stocks: The curious case of falling gold prices
▼ + stars: | 2022-09-23 | by ( Julia Horowitz | ) edition.cnn.com time to read: +7 min

But gold prices haven’t surged. “Investors don’t have much appetite to hold gold in the current environment,” Warren Patterson, head of commodities strategy at ING, told me. Breaking it down: Gold prices skyrocketed in early March as fears about the consequences of Russia’s invasion of Ukraine mounted. A stronger currency makes it more expensive for foreign investors to buy in, and can reduce demand, pushing down prices. In the meantime, Costco plans to leverage its size to stay competitive on prices and keep growing sales.

☆ UK's finance minister says his economic strategy is not a gamble - BBC
▼ + stars: | 2022-09-23 | by ( ) www.reuters.com time to read: 1 min

The Chancellor of the Exchequer Kwasi Kwarteng speaks during the Government's Growth Plan statement at the House of Commons, in London, Britain, September 23, 2022. UK Parliament/Jessica Taylor/Handout via REUTERSLONDON, Sept 23 (Reuters) - Britain's new finance minister Kwasi Kwarteng said on Friday that the government's changes to tax, stamp duty and spending were not a gamble. "What was (a gamble) in my view, was sticking to the course we were on," he told the BBC in an interview after setting out the mini-budget earlier in the day. Register now for FREE unlimited access to Reuters.com RegisterReporting by Muvija M; Editing by Kate HoltonOur Standards: The Thomson Reuters Trust Principles.

☆ UK government dishes out extensive tax cuts as country braces for recession
▼ + stars: | 2022-09-23 | by ( Jenni Reid | ) www.cnbc.com time to read: +3 min

LONDON — The new U.K. government announced a sweeping program of tax cuts and investment incentives Friday, as Prime Minister Liz Truss seeks to boost the country's faltering economic growth. The energy support package is expected to cost more than £100 billion ($111 billion) over two years. The Institute for Fiscal Studies, an economic research group, said the reversal in the income tax rise and canceling the planned rise in corporation tax would lead to a £30 billion reduction in taxation revenue. It added that "setting plans underpinned by the idea that headline tax cuts will deliver a sustained boost to growth is a gamble, at best." Groups including the opposition Labour party argue that the tax cuts will disproportionately benefit the wealthy.

☆ Interest rates: Bank of England hikes by half a point for second straight month
▼ + stars: | 2022-09-22 | by ( Mark Thompson | ) edition.cnn.com time to read: +2 min

London CNN Business —The Bank of England announced its seventh interest rate hike in less than a year on Thursday as it battles the highest level of inflation of any G7 economy. The central bank repeated last month’s hike of half a percentage point, taking rates to 2.25% from 1.75%. The US Federal Reserve on Wednesday announced an historic third consecutive three-quarter percentage point rise in interest rates, adding further wind to the dollar’s sails. The European Central Bank also broke new ground with its decision earlier this month to hike eurozone interest rates from 0% to 0.75%. The Swiss National Bank on Thursday hiked rates by three quarters of a percentage point, taking them out of negative territory to 0.5%.

☆ UK consumer mood sinks to new depths despite energy bills help
▼ + stars: | 2022-09-22 | by ( Andy Bruce | ) www.reuters.com time to read: +2 min

Register now for FREE unlimited access to Reuters.com RegisterA woman wearing a face mask shops in Cambridge Market Square, amid the coronavirus disease (COVID-19) outbreak, in Cambridge, Britain, January 14, 2022. The consumer confidence index from market research firm GfK fell to -49 in September from -44 in August, worse than all forecasts in a Reuters poll that pointed to an improved reading of -42. Readings of -30 and below have presaged recession on four out of five occasions since the survey started in 1974. Truss announced on Sept. 8 that Britain will cap consumer energy bills for two years and funnel billions to prop up power companies. read moreRegister now for FREE unlimited access to Reuters.com RegisterReporting by Andy Bruce, editing by William JamesOur Standards: The Thomson Reuters Trust Principles.

☆ London stocks fall with eyes on BoE meet after Fed's big rate hike
▼ + stars: | 2022-09-22 | by ( Bansari Mayur Kamdar | ) www.reuters.com time to read: +2 min

The London Stock Exchange Group offices are seen in the City of London, Britain, December 29, 2017. The blue-chip FTSE 100 index (.FTSE) fell 0.4% and the domestically focussed mid-cap index (.FTMC) declined 1.0%, tracking weakness in European and Asian peers. read moreBanks (.FTNMX301010) and insurers (.FTNMX303010) fell 0.6% and 0.4%, respectively, weighing on the benchmark FTSE 100 index. So going forward, as the BoE continues to hike rates, it could be negative for bank stocks." Meanwhile, the sterling pared early losses after briefly hitting a new 37-year low against a firm dollar.

☆ 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.

☆ Bank of England raises rates to 2.25%, despite likely recession
▼ + stars: | 2022-09-22 | by ( ) www.reuters.com time to read: +3 min

A general view of the Bank of England (BoE) building, the BoE confirmed to raise interest rates to 1.75%, in London, Britain, August 4, 2022. REUTERS/Maja SmiejkowskaLONDON, Sept 22 (Reuters) - The Bank of England raised its key interest rate to 2.25% from 1.75% on Thursday and said it would continue to "respond forcefully, as necessary" to inflation, despite the economy entering recession. However, it noted that the energy price cap, while reducing inflation in the short term, would boost pressures further out. Before the rate decision, financial markets expected the BoE to raise rates to 3.75% by the end of the year, with a peak of 5% reached in mid-2023. Less than a year ago, BoE rates were at a record-low 0.1%.

☆ New UK finance minister Kwarteng seeks end to "cycle of stagnation"
▼ + stars: | 2022-09-22 | by ( David Milliken | ) www.reuters.com time to read: +4 min

Paul Johnson, director of the Institute for Fiscal Studies (IFS) think tank, said Truss and Kwarteng's tax cuts could be the largest since 1988, and risked putting Britain's public debt on an unsustainable path. The IFS, together with U.S. bank Citi, estimate household energy subsidies will cost about 120 billion pounds over two years, while six months of business energy subsidies will cost 40 billion pounds. read moreThese are a one-off, and the bigger concern for the IFS is around 30 billion pounds of permanent tax cuts - starting with 14 billion pounds in reduced payroll taxes, confirmed on Thursday, and 15 billion pounds of cuts to corporation tax. For Kwarteng, tax cuts and deregulation are a way to end what he calls "a cycle of stagnation" that led to tax rates being on course for their highest level since the 1940s. "We will liberalise planning rules in specified agreed sites, releasing land and accelerating development," Kwarteng is expected to say.

☆ Energy crisis spurs Britain to end its fracking ban, digging up a long-running debate
▼ + stars: | 2022-09-22 | by ( Jenni Reid | ) www.cnbc.com time to read: +5 min

The derrick is seen behind anti-fracking banners at Cuadrilla's Lancashire fracking site. Christopher Furlong | Getty ImagesLONDON — The U.K. government lifted its ban on fracking Thursday, citing the need to increase domestic energy supply following the Russian invasion of Ukraine. The divideA 2020 review by Warwick Business School estimated fracked gas could account for between 17% and 22% of U.K. energy consumption between 2020 and 2050. A past study found that shale gas operations themselves would contribute relatively little to greenhouse gas emissions. A report commissioned by the government in April and published Thursday found it was still not possible to accurately predict geological activity as a result of U.K. fracking operations.

Chancellor of the Exchequer Kwasi Kwarteng walks outside Number 10 Downing Street, in London, Britain September 7, 2022. REUTERS/Phil NobleLONDON, Sept 22 (Reuters) - British finance minister Kwasi Kwarteng said on Thursday a 1.25 percentage point increase in payroll tax that took effect earlier this year would be reversed from Nov. 6, setting out the timeline for a previously promised move. To raise living standards for all, we need to be unapologetic about growing our economy," Kwarteng said in a statement. Kwarteng will also scrap from April 2023an increase to dividend tax rates which had been brought in alongside the payroll tax increase to raise contributions from those who are paid through different channels. The extra money needed to make up for the shortfall caused by cancelling the tax will come from general taxation, the Treasury said.

☆ Factbox: Britain sets out tax cuts and other measures to boost growth
▼ + stars: | 2022-09-22 | by ( ) www.reuters.com time to read: +2 min

Register now for FREE unlimited access to Reuters.com RegisterNew British Chancellor of the Exchequer Kwasi Kwarteng walks outside Number 10 Downing Street, in London, Britain September 6, 2022. REUTERS/Toby Melville//File PhotoLONDON, Sept 22 (Reuters) - Britain's new finance minister Kwasi Kwarteng unveiled a slew of measures on Thursday including the reversal of an increase in payroll tax in an effort to boost economic growth. He is expected to detail more measures in a mini-budget on Friday, including tax cuts, energy subsidies and planning reforms. read moreBelow is a brief overview of the key measures announced so far, and additional steps that could be announced on Friday. Register now for FREE unlimited access to Reuters.com RegisterReporting by Sachin Ravikumar; Editing by Catherine EvansOur Standards: The Thomson Reuters Trust Principles.

☆ UK government borrows more than expected in August
▼ + stars: | 2022-09-21 | by ( ) www.reuters.com time to read: +1 min

Register now for FREE unlimited access to Reuters.com RegisterA general view of the Bank of England (BoE) building, the BoE confirmed to raise interest rates to 1.75%, in London, Britain, August 4, 2022. The Office for National Statistics said public sector borrowing excluding state-owned banks stood at 11.82 billion pounds ($13.44 billion). A Reuters poll of economists had pointed to borrowing of 8.45 billion pounds for the shortfall in August. Register now for FREE unlimited access to Reuters.com RegisterThe pound dipped on the news and briefly touched $1.1349, its lowest against the U.S. dollar since 1985. ($1 = 0.8797 pounds)Register now for FREE unlimited access to Reuters.com RegisterReporting by Andy Bruce; editing by William James and Paul SandleOur Standards: The Thomson Reuters Trust Principles.

Berlin/London (CNN Business) Germany is nationalizing Uniper , its biggest importer of natural gas, as part of an €8 billion ($7.9 billion) plan to prevent an energy shortage this winter. Uniper provides 40% of the country's gas supply and is crucial for large companies and private consumers in Europe's biggest economy. But Habeck said the situation had "worsened dramatically" since Russia cut off gas supplies to Europe through the Nord Stream 1 pipeline indefinitely on September 1, citing an oil leak. Although gas supplies through Nord Stream 1 are suspended, Germany's gas reserves are filled at more than 90% capacity, European Storage provider GIE AGSI+ said on its website. UK details subsidies for businessGermany is not alone in paying a very heavy price to overcome gas supply shortages.

☆ Putin speech sends sterling to fresh 37-year low ahead of Fed, BoE meetings
▼ + stars: | 2022-09-21 | by ( Lucy Raitano | ) www.reuters.com time to read: +3 min

Pound and U.S. dollar banknotes are seen in this illustration taken January 6, 2020. An expected interest rate hike by the U.S Federal Reserve (Fed) later in the day played into market sentiment, with eyes also on a Bank of England rate decision and a new government mini-budget this week. By 1143 GMT, the pound was down 0.31% against the dollar at $1.13460 pence , having earlier hit $1.13040 - its lowest since 1985. Register now for FREE unlimited access to Reuters.com Register"This morning’s dip is primarily a function of the Russia news. The Office for National Statistics said public sector borrowing excluding state-owned banks stood at 11.82 billion pounds ($13.44 billion) last month.

Berlin/London CNN Business —Germany is nationalizing Uniper, its biggest importer of natural gas, as part of an €8 billion ($7.9 billion) plan to prevent an energy shortage this winter. The German government will hold around 99% of Uniper after injecting new capital and buying out its Finnish parent company Fortum (FOJCF), German Economy Minister Robert Habeck told journalists in Berlin on Wednesday. Uniper provides 40% of the country’s gas supply and is crucial for large companies and private consumers in Europe’s biggest economy. Under the rescue deal, the government committed to provide €7.7 billion ($7.8 billion) to cover potential future losses, while state-run bank KfW agreed to increase its credit facility by €7 billion ($7.1 billion). UK details subsidies for businessGermany is not alone in paying a very heavy price to overcome gas supply shortages.

☆ Bank of England set for second hefty rate rise in a row
▼ + stars: | 2022-09-21 | by ( David Milliken | ) www.reuters.com time to read: +4 min

Register now for FREE unlimited access to Reuters.com RegisterThe BoE's half-point increase in rates last month was its biggest since 1995. The BoE was the first major central bank to raise rates in the current cycle, beginning in December last year. This, in turn, could prompt the BoE to raise rates more than previously thought over the coming year, despite what will still be a big squeeze on living standards from high inflation. Interest rate futures late on Wednesday showed BoE rates reaching 3.75% in December and plateauing at 4.75% from March. The BoE also decided to delay by a week its policy announcement, which had been due out on Sept. 15.

☆ Confidence in UK assets on thin ice, investors warn - Reuters poll
▼ + stars: | 2022-09-21 | by ( Andy Bruce | ) www.reuters.com time to read: +4 min

Slightly more than half - 55% - of the international banks and research consultancies polled by Reuters last week said there was a high risk confidence in British assets would deteriorate sharply in the coming three months. Register now for FREE unlimited access to Reuters.com RegisterFifteen out of 29 respondents said the risk was high, including three primary dealers of British government bonds. These shifts in part reflect investors' worry that Britain's reliance on imported energy will leave it exposed to higher inflation for longer. "But the new, inexperienced government faces great challenges and could easily make missteps which add to investors' concerns." "If higher inflation becomes a more structural phenomenon... yields could also turn out to be structurally higher," Rabobank's Bas Van Geffen said.

☆ Britain halves electricity and gas prices for businesses
▼ + stars: | 2022-09-21 | by ( ) www.reuters.com time to read: +1 min

It said wholesale prices for electricity would be capped at about 211 pounds ($239) per megawatt hour (MWh) and for gas at 75 pounds per MWh. "We have stepped in to stop businesses collapsing, protect jobs, and limit inflation," finance minister Kwasi Kwarteng said. Register now for FREE unlimited access to Reuters.com RegisterThe level of the cap has been set at less than half the wholesale prices anticipated this winter, the government said. Suppliers will be compensated for the reduction in wholesale gas and electricity unit prices that they are passing onto non-domestic customers, it said. 31 2023, for all non-domestic energy users, including charities and the public sector such as schools and hospitals as well as businesses.

☆ UK tax cuts risk 'unsustainable' debt rise - think tank
▼ + stars: | 2022-09-21 | by ( ) www.reuters.com time to read: +2 min

REUTERS/David 'Dee' DelgadoLONDON, Sept 21 (Reuters) - Prime Minister Liz Truss's plans to cut payroll taxes and reverse a planned increase in corporation tax risk putting Britain's national debt on an unsustainable upward path, the Institute for Fiscal Studies think tank said on Wednesday. Truss promised the tax cuts, worth around 30 billion pounds a year, as part of her successful campaign for the Conservative Party leadership, along with a temporary subsidy for household energy bills that will cost around 100 billion pounds. Register now for FREE unlimited access to Reuters.com Register"Reversing National Insurance Contributions and corporation tax rises would leave debt on an unsustainable path," it said. The IFS said there was little guarantee that permanent tax cuts would create enough growth to pay for themselves. "There is no miracle cure, and setting plans underpinned by the idea that headline tax cuts will deliver a sustained boost to growth is a gamble, at best," it said.

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