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☆ A Fed shift from quantitative tightening to 'tinkering' will emerge as a new bull factor for the stock market in 2023, Bank of America says
▼ + stars: | 2022-10-21 | by ( Matthew Fox | ) www.businessinsider.com time to read: +3 min

A Fed shift away from quantitative tightening could be the next bull factor for stocks in 2023, according to Bank of America. The Fed has started to reduce its near $9 trillion balance sheet at a clip of about $95 billion per month. That's because central banks are "petrified of market consequences of liquidity withdrawal," BofA's investment strategist Michael Hartnett said. Fear of deeper declines materializing in equity and fixed income markets is what could ultimately spark a Fed shift away from quantitative tightening and towards quantitative "tinkering," Hartnett said. Additionally, the European central bank is "considering but not yet committing to even passive quantitative tightening," Hartnett said.

☆ Why the market crisis that ousted the UK's prime minister would never happen in the US
▼ + stars: | 2022-10-21 | by ( Ben Winck | ) www.businessinsider.com time to read: +9 min

UK Prime Minister Liz Truss' tax plan sparked immediate market backlash and, eventually, her resignation. Prime Minister Liz Truss, just 22 days into her leadership role, unveiled a mini-budget that proposed tax cuts that primarily benefited the wealthy. The prime minister announced her resignation on Thursday, just 45 days after taking office. The prime minister was dealt a less-than-ideal hand when she entered office. The checks and balances throughout the US government also stand in the way of such rapid-fire economic policy.

But Broadbent's concentration on the likely peak terminal rate next year is what matters most. For context, that UK terminal rate, now pencilled in for around the middle of 2023, rocketed almost two full percentage points from just prior to the botched mini-budget to as high as 6.25%. Fed terminal rates, now targeted about March next year, have jumped 150 bps to 5% over the past two months. And Morgan Stanley, for example, see a UK terminal rate as low as 4% - a huge drop from current market pricing. The stubborn refusal of terminal rate pricing to return to where it was last month reflects the extent of those jitters.

☆ 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.

☆ Sterling rallies as pressure on UK PM Truss mounts
▼ + stars: | 2022-10-20 | by ( Lucy Raitano | ) www.reuters.com time to read: +3 min

British Prime Minister Liz Truss is meeting Graham Brady, the head of the 1922 Committee of Conservative lawmakers, a source in Truss's Downing Street office said. Register now for FREE unlimited access to Reuters.com RegisterAgainst this backdrop, the pound rose 0.5% to $1.1260 , having earlier traded 0.4% down. Analysts said a dialling back of aggressive rate hike bets following comments from the BoE's Ben Broadbent also weighed on sterling. Investors reined in further their bets of a full percentage-point interest rate increase by the BoE next month following the comments. Rating agencies S&P and Moody's review UK sovereign ratings on Friday, another potential headwind for British markets.

☆ Investors rein in BoE rate hike bets on Broadbent comments
▼ + stars: | 2022-10-20 | by ( ) www.reuters.com time to read: +2 min

Such a big increase in Bank Rate looked a near certainty before Truss was forced to backtrack on her unfunded tax cut plans this month. The 30-year gilt yield was up by about a basis points at 4.000% at 9:51 am (0851 GMT), having touched a session high 4.103% earlier. The yield on 20-year British government bonds similarly rose on Thursday, up about two basis points on the day, having also fallen sharply on Wednesday. Two-year gilt yields were up by 11 basis points on Thursday. But the difference in yield between gilts and similar German and U.S. government bonds remains significantly wider than before the crisis began.

☆ These 3 charts show the chaos that ran through markets during the 45 days that Liz Truss was UK prime minister
▼ + stars: | 2022-10-20 | by ( George Glover | ) www.businessinsider.com time to read: +4 min

Liz Truss resigned as UK prime minister on Thursday after just 45 days in the role. Truss quit as UK prime minister after just 45 days in the role Thursday, becoming the shortest-serving leader in the country's history. "First her policies went up in flames, then her brief career as prime minister," IG's chief market analyst Chris Beauchamp said. "The great political gamble of Liz Truss has spectacularly backfired but not before wreaking significant damage to the UK economy." Read more: UK Prime Minister Liz Truss resigned after the market rebelled against her aggressive economic growth plan.

☆ The urgent search for the perfect inflation hedge
▼ + stars: | 2022-10-20 | by ( Edward Chancellor | ) www.reuters.com time to read: +7 min

But when inflation takes off, stocks and bonds become positively correlated, rising and falling together. The failure of bonds and stocks to deliver protection when inflation spikes has forced investors to seek other hedges. “Each attempted inflation hedge has its particular attractions, risks, and shortcomings,” wrote the journalist Henry Hazlitt in 1978. Hazlitt wrote that the only reliable inflation hedge is to end inflation. If the Fed loses its battle against rising prices, more people will come to appreciate the insurance they provide.

☆ UK gilts rise but week of uncertainty beckons as Truss quits
▼ + stars: | 2022-10-20 | by ( ) www.reuters.com time to read: +1 min

Investors further scaled back their bets on an outsized 1% point interest rate hike next month by the Bank of England. Deputy Governor Ben Broadbent questioned aggressive pricing in markets of future rate hikes in a speech earlier on Thursday. Twenty- and 30-year gilt yields , which had fallen as much as 13 basis points (bps) earlier in the day, were down 7 bps as of 1442 GMT. "UK financial market reaction to Liz Truss's resignation today has been fairly sanguine," said Daniel Mahoney, an economist at Handelsbanken. Register now for FREE unlimited access to Reuters.com RegisterReporting by Andy Bruce Editing by William SchombergOur Standards: The Thomson Reuters Trust Principles.

Prime Minister Liz Truss announces her resignation at 10 Downing Street on October 20, 2022 in London, England. Leon Neal | Getty ImagesLONDON — U.K. Prime Minister Liz Truss resigned Thursday following a failed tax-cutting budget that rocked financial markets and which led to a revolt within her own Conservative Party. "I recognize though, given the situation, I cannot deliver the mandate on which I was elected by the Conservative Party. I have therefore spoken to His Majesty the King to announce that I am resigning as leader of the Conservative Party." The number who have written letters to Brady expressing no confidence in the prime minister was reported to be over 100 by Thursday.

☆ Sterling weakens as Truss clings to power, markets dial back rate-hike bets
▼ + stars: | 2022-10-20 | by ( Lucy Raitano | ) www.reuters.com time to read: +3 min

British Prime Minister Liz Truss battled to retain her grip on power, a day after a second top minister quit and rowing and jostling broke out among her lawmakers in parliament. Analysts said a dialling back of aggressive rate hike bets following comments from the BoE's Ben Broadbent also weighed on sterling. Investors reined in further their bets of a full percentage-point interest rate increase by the BoE next month following the comments. "The dip in sterling is more driven by monetary policy than politics," said Colin Asher, senior economist at Mizuho Bank. "Broadbent noted that the policy rate may not need to go up as much as markets are pricing and short-term gilt yields and sterling both declined."

British Pound Sterling and U.S. Dollar notes are seen in this June 22, 2017 illustration photo. The U.S. dollar held at a 32-year peak against the yen and rose from a two-week trough against a basket of major peers, underpinned by expectations of aggressive U.S. Federal Reserve interest rate hikes. “Sterling edged lower against its peers after yet another upside surprise in the latest UK inflation data... “Following the budget fiasco, there is also a great deal of uncertainty as to the pace of upcoming Bank of England interest rate hikes," he added. read moreElsewhere, the dollar pushed as high as 149.48 yen for the first time since August 1990 in early London trading.

☆ FOREX Dollar holds near 32-year peak vs yen despite intervention risks; sterling licks wounds
▼ + stars: | 2022-10-19 | by ( Kevin Buckland | ) www.reuters.com time to read: +5 min

The dollar pushed as high as 149.395 yen overnight for the first time since August 1990, before last trading at 149.305 in the Asian session. read moreThe dollar index - which measures the currency against six peers including the yen, sterling and euro - added 0.2% to 112.19, after dropping to the lowest since Oct. 6 at 111.76 overnight. Meanwhile, sterling was little changed at $1.1318, licking its wounds after a 0.34% decline in the previous session. Economists in a Reuters poll predict another 75 basis-point rate hike from the European Central Bank on Thursday of next week. The currency last traded 0.08% higher at $0.56905, close to the previous session's two-week high of $0.5719.

☆ Dollar firm near 32-peak vs yen despite intervention risks; sterling treads water
▼ + stars: | 2022-10-19 | by ( Kevin Buckland | ) www.reuters.com time to read: +4 min

The euro hovered close to a two-week high. read moreThe dollar, which currently reigns as the safe-haven currency of choice, has sagged this week amid the bear rally in equities globally following some upbeat earnings. read moreThe euro was about flat at $0.9857, hanging just under Tuesday's high of $0.98755, a level last seen on Oct. 6. read moreThe New Zealand dollar remained elevated following Tuesday's blowout consumer price data, which raises expectations for continued aggressive tightening by the Reserve Bank. The currency last traded 0.19% higher at $0.5695, close to the previous session's two-week high of $0.5719.

☆ Most Asian shares extend rally, markets await UK inflation data
▼ + stars: | 2022-10-19 | by ( Stella Qiu | ) www.reuters.com time to read: +4 min

MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) edged up 0.2%, but further gains were capped by slight falls in Chinese shares. Japan's Nikkei (.N225) advanced 0.4%, Australia's resources-heavy shares (.AXJO) gained 0.4%, while South Korea (.KS11) rebounded 0.5%. Register now for FREE unlimited access to Reuters.com RegisterU.S. S&P 500 futures rose 0.8% and the Nasdaq futures jumped 1.3%. Netflix Inc (NFLX.O) reversed customer losses that had hammered its stock this year and projected more growth ahead, sending shares 14% higher in after-hours trading. Chris Turner, global head of markets at ING, said a quiet week for U.S. data could also see the dollar correction extend a little.

☆ BoE's Hauser: Mini-budget caused 'full-scale liquidation event' for pension funds
▼ + stars: | 2022-10-19 | by ( ) www.reuters.com time to read: +1 min

LONDON, Oct 19 (Reuters) - The fallout in gilt markets from the British government's mini-budget was a "full-scale liquidation event" for pension funds, whose managers were calling the Bank of England with increasing alarm, the central bank's Executive Director for Markets said. "This was a situation that went from 'we're ringing you to let you know' to shouting on the phone to us, within two days," Andrew Hauser told lawmakers on parliament's Treasury committee on Wednesday. "This was a full-scale liquidation event." Pension funds were forced to offload billions of pounds of UK government bonds, or gilts, at distressed prices last month after the government's announcement of tax cuts sent yields soaring, triggering margin calls on derivatives designed to protect the funds against movements in rates. Register now for FREE unlimited access to Reuters.com RegisterReporting by William Schomberg, writing by Sachin Ravikumar, Editing by Kylie MacLellanOur Standards: The Thomson Reuters Trust Principles.

☆ Dutch central bank urges pension funds to guard against UK-style crisis - FT
▼ + stars: | 2022-10-19 | by ( ) www.reuters.com time to read: +1 min

Oct 19 (Reuters) - The Dutch central bank is calling on the country's pension funds to consider boosting holdings of cash and other liquid assets to ensure that they can avoid the turmoil that has hit the UK, the Financial Times reported on Wednesday. The officials at the Dutch central bank have asked local retirement funds to check for signs of stress, recommending that they review liquidity rules and report on any need for fire sales of assets, the report added, citing people familiar with the matter. The move comes after UK pension funds were forced to offload billions of pounds government bonds, or gilts, at distressed prices earlier this month, after an ill-fated package of tax cuts sent yields soaring, triggering margin calls on derivatives designed to protect the funds against movements in rates. Register now for FREE unlimited access to Reuters.com RegisterReporting by Rhea Binoy in Bengaluru; Editing by Kim CoghillOur Standards: The Thomson Reuters Trust Principles.

☆ Back to basics: double-digit UK inflation
▼ + stars: | 2022-10-19 | by ( ) www.reuters.com time to read: +2 min

A look at the day ahead in European and global markets from Ankur BanerjeeWith investors' mood perking up this week, leading to a buoyant rally, UK inflation data, due on Wednesday, takes the spotlight. The reading will likely determine how hawkish the BoE gets in the near term. The consumer price index, already at a decades high, is expected to jump 10% for the month of September. Register now for FREE unlimited access to Reuters.com RegisterThe cost of living crisis has led to protests and strikes in in European countries, while red-hot inflation has pushed firms eastward in Europe to cut costs. The currency market remains on guard for any sign of another yen intervention as the beaten down currency hovers around the psychological barrier of 150 per dollar.

☆ Dollar holds near 32-peak versus yen despite intervention risks; sterling licks wounds
▼ + stars: | 2022-10-19 | by ( ) www.cnbc.com time to read: +4 min

The dollar pushed as high as 149.395 yen overnight for the first time since August 1990, before last trading at 149.305 in the Asian session. Meanwhile, sterling was little changed at $1.1318, licking its wounds after a 0.34% decline in the previous session. Economists in a Reuters poll predict another 75 basis-point rate hike from the European Central Bank on Thursday of next week. The New Zealand dollar remained elevated following Tuesday's blowout consumer price data, which raises expectations for continued aggressive tightening by the Reserve Bank. The currency last traded 0.08% higher at $0.56905, close to the previous session's two-week high of $0.5719.

☆ UK inflation moves back up to 40-year high as Brits battle cost-of-living crisis
▼ + stars: | 2022-10-19 | by ( Hannah Ward-Glenton | ) www.cnbc.com time to read: +2 min

The Office for National Statistics announced inflation figures Wednesday as the U.K. undergoes a historic cost-of-living crisis and political turmoil. The figure for September matches the 40-year high British inflation reached in July. The rate rose in the year to September 2022 as the country's cost-of-living crisis continues to hammer households and businesses ahead of a tough winter. Inflation unexpectedly dipped to 9.9% in August, down from 10.1% in July, on the back of a fuel price decline. September's inflation rate highlights the severity of the U.K.'s inflation crisis, and comes as the country weathers a period of economic volatility.

☆ Morning Bid: Back to basics - double-digit UK inflation
▼ + stars: | 2022-10-19 | by ( ) www.reuters.com time to read: +2 min

☆ Bank of England Pushes On With Plan to Start Selling Bonds
▼ + stars: | 2022-10-18 | by ( Paul Hannon | Anna Hirtenstein | ) www.wsj.com time to read: 1 min

The Bank of England is preparing to pivot rapidly from buyer to seller of U.K. government bonds, in a bet that recent market turmoil sparked by the government’s fiscal plans has waned sufficiently for the central bank to start unwinding some of the extraordinary support it provided at the height of the pandemic. Pushing ahead would mark the second time this month that the British central bank has resisted market pressure. On Friday it ended a short bout of emergency bond purchases despite calls from pension funds and others for an extension of that program, which was aimed at soothing markets after the government’s plans to cut taxes sparked a mounting selloff in gilts.

☆ INDIA RUPEE Rupee jumps as UK fiscal budget turnaround brings cheer
▼ + stars: | 2022-10-18 | by ( Anushka Trivedi | ) www.reuters.com time to read: +2 min

MUMBAI, Oct 18 (Reuters) - The Indian rupee strengthened on Tuesday to hover close to the 82 per dollar mark, as risk sentiment improved after reversal of Britain's controversial fiscal plans pressured the greenback. The rupee jumped 0.35% to 82.05 by 0442 GMT, after having traded in a narrow band near the 82.40 level for the past five sessions. The currency has not traded under 82 per dollar in nearly two-weeks and traders see low chances of it breaching that in this session. Any level below 82 per dollar was good for importers with near-term exposures to buy as USD/INR premiums are currently lower too, he added. Register now for FREE unlimited access to Reuters.com RegisterReporting by Anushka Trivedi in Mumbai; Editing by Neha AroraOur Standards: The Thomson Reuters Trust Principles.

☆ Bank of England says first gilt sales to be held on Nov. 1
▼ + stars: | 2022-10-18 | by ( ) www.reuters.com time to read: 1 min

LONDON, Oct 18 (Reuters) - The Bank of England said on Tuesday the first sale of gilts held in its asset purchase facility would take place on Nov. 1 in light of the government's plan to make a fiscal announcement on the previously planned date of Oct. 31. "The first gilt sales operation was scheduled to take place on 31 October 2022 and proceed thereafter," the bank said in a statement. "In light of the Government's fiscal announcement now scheduled for 31 October 2022, the first gilt sale operation will now take place on 1 November 2022." Register now for FREE unlimited access to Reuters.com RegisterReporting by William James, Editing by Paul SandleOur Standards: The Thomson Reuters Trust Principles.

☆ Britain's failed tax experiment will leave economic scars and credibility issues, analysts say
▼ + stars: | 2022-10-18 | by ( Jenni Reid | ) www.cnbc.com time to read: +6 min

U.K. Prime Minister Liz Truss faces increasing pressure to resign. The yield on these bonds, which reflect the cost of borrowing for the government and influence interest rates on many products such as mortgages, eased lower after the statement Monday. The yield on 10-year bonds, the closely-watched benchmark seen as the indicator of long-term interest rates, remains significantly elevated at 4.045%, up from 3.49% before the budget. Bonds tend to become less attractive when interest rates rise, decreasing their price and sending up the yield. watch nowWider effectsWith the ideologically-driven policy platform Truss ran on now dead in the water, there is uncertainty in many other areas.

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