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☆ Jeremy Hunt could become next UK finance minister - Times
▼ + stars: | 2022-10-14 | by ( ) www.reuters.com time to read: 1 min

LONDON, Oct 14 (Reuters) - Former British foreign minister Jeremy Hunt will succeed Kwasi Kwarteng as the new finance minister, a reporter for the Times said on Friday, following media reports that Kwarteng has been sacked. "Multiple sources are now telling me that Jeremy Hunt will be the new chancellor, although I’ve not had official confirmation yet," Steven Swinford, Political Editor at the Times newspaper, said on Twitter. Register now for FREE unlimited access to Reuters.com RegisterReporting by William James, writing by Muvija M; Editing by Sachin RavikumarOur Standards: The Thomson Reuters Trust Principles.

☆ UK finance minister Hunt to set out govt's fiscal plan on Oct. 31
▼ + stars: | 2022-10-14 | by ( ) www.reuters.com time to read: 1 min

New Chancellor of the Exchequer Jeremy Hunt leaves 10 Downing Street in London, Britain, October 14, 2022. REUTERS/Henry NichollsLONDON, Oct 14 (Reuters) - New British finance minister Jeremy Hunt will set out the government's medium-term fiscal plan on Oct. 31, the Treasury said in a statement on Friday, sticking to the date his predecessor had announced. The Treasury said Hunt, who was appointed on Friday after his predecessor Kwasi Kwarteng was fired by Prime Minister Liz Truss, would set out how the government would get debt falling as a percentage of GDP over the medium term. Register now for FREE unlimited access to Reuters.com RegisterReporting by Kylie MacLellan; Editing by Alistair SmoutOur Standards: The Thomson Reuters Trust Principles.

☆ UK finance minister Kwarteng confirms he has been sacked
▼ + stars: | 2022-10-14 | by ( ) www.reuters.com time to read: +1 min

Chancellor of the Exchequer Kwasi Kwarteng exits a car on Downing Street in London, Britain, October 14, 2022. REUTERS/Henry NichollsLONDON, Oct 14 (Reuters) - British finance minister Kwasi Kwarteng confirmed on Friday he had been sacked by Prime Minister Liz Truss, becoming the third chancellor to leave the government this year. I have accepted," Kwarteng said in a letter to Truss, which he published on Twitter. read more"It is important now as we move forward to emphasise your government's commitment to fiscal discipline. The Medium-Term Fiscal Plan is crucial to this end, and I look forward to supporting you and my successor to achieve that from the backbenches," Kwarteng said.

☆ European markets rise on UK fiscal U-turn hopes; Stoxx 600 up 1%
▼ + stars: | 2022-10-14 | by ( ) www.cnbc.com time to read: +1 min

British Finance Minister Kwasi Kwarteng (left) on Monday morning confirmed that the government would be scrapping its plans to cut tax for the country's highest earners. European markets are set to jump on Friday as speculation abounds that the U.K. government could be about to U-turn on its controversial fiscal policies. Finance Minister Kwasi Kwarteng flew home early from the International Monetary Fund in Washington on Thursday night as ministers convened to address the nation's economic chaos. Markets in Asia-Pacific then rallied overnight as investors seemingly shook off the inflation report and instead focused on hopes for a U.K. fiscal U-turn and further stimulus from the Chinese government. U.S. stock futures were higher in early premarket trade on Friday as investors await a slew of corporate earnings from the country's biggest banks.

☆ UK's Kwarteng, asked about new U-turn, says no change in his position
▼ + stars: | 2022-10-13 | by ( ) www.reuters.com time to read: +1 min

"My total focus... is on delivering on the mini-budget and making sure that we get growth back into our economy." Sky News and other media said earlier on Thursday that Prime Minister Liz Truss was considering a possible U-turn on the plan not to raise corporation tax. Truss's office said there was no change in the plan. The BBC asked Kwarteng if he would be finance minister and Truss would still be prime minister this time next month. Register now for FREE unlimited access to Reuters.com RegisterWriting by William Schomberg Editing by Kate HoltonOur Standards: The Thomson Reuters Trust Principles.

☆ British pound jumps on reports UK government may reverse parts of its tax-cutting proposals
▼ + stars: | 2022-10-13 | by ( Sam Meredith | ) www.cnbc.com time to read: +1 min

In this photo illustration, the British pound is seen displayed. LONDON — Sterling jumped against the U.S. dollar on Thursday following multiple reports that the British government is in talks to scrap parts of its unfunded package of tax cuts. The British pound traded 1.5% higher at $1.1269 during afternoon deals in London, before paring gains on robust U.S. inflation data. Long-dated U.K. government bonds — known as "gilts" — rallied sharply, pushing yields down to just over 4.41%. Truss and Kwarteng have both insisted the government's proposals are necessary to get the economy growing.

"The chancellor will come to the despatch box," he said when asked by Sky News whether the corporation tax plan would definitely stay. Newspapers reported that some lawmakers who never wanted Truss to replace Boris Johnson as leader in the first place already wanted her out. "I think that changing the leadership would be a disastrously bad idea, not just politically but also economically, and we are absolutely going to stay focused on growing the economy," Cleverly said of Truss. But a fire-sale in the government bond market has driven up borrowing costs and mortgage rates and forced the Bank of England to intervene to protect pension funds. read moreMeanwhile, as Truss battled with the turmoil, she met King Charles for a weekly audience at Buckingham Palace between monarch and prime minister on Wednesday.

☆ UK lenders expect credit availability to fall - BoE
▼ + stars: | 2022-10-13 | by ( ) www.reuters.com time to read: 1 min

LONDON, Oct 13 (Reuters) - British lenders expect less credit to be available during the three months to the end of November across mortgages, unsecured consumer lending and business loans, a Bank of England survey showed on Thursday. The BoE's quarterly credit conditions survey took place between Aug. 30 and Sept. 16, before finance minister Kwasi Kwarteng's "mini-budget" announcement and subsequent market turmoil. Register now for FREE unlimited access to Reuters.com RegisterReporting by David Milliken Editing by William SchombergOur Standards: The Thomson Reuters Trust Principles.

☆ UK house price growth slows to weakest since July 2020 - RICS
▼ + stars: | 2022-10-12 | by ( William Schomberg | ) www.reuters.com time to read: +3 min

The RICS house price balance - measuring the difference between the percentage of surveyors reporting price rises and those seeing a fall - fell sharply to +32 in September from +51 in August, signalling a slowdown in price growth. "Looking further out, the picture portrayed by the RICS survey has clearly shifted in a negative direction," he added. After booming during and after the COVID-19 lockdowns as home-owners sought bigger properties, Britain's housing market has cooled recently. Rival lender Nationwide says British house prices failed to rise in monthly terms for the first time since July 2021 in September. A recent cut to Britain's stamp duty tax on property purchases, part of finance minister Kwasi Kwarteng's package of tax cuts, was set to be outweighed by the rise in mortgage costs, RICS said.

"The ongoing squeeze on household finances continues to weigh on growth, and likely to have caused the UK economy to enter a technical recession from the third quarter of this year," Yael Selfin, chief economist at KPMG UK, said. Manufacturing fell by 1.6% from July and more maintenance than unusual in the North Sea hit the mining and quarrying sector which includes oil and gas. "Many other consumer-facing services struggled, with retail, hairdressers and hotels all faring relatively poorly," ONS Chief Economist Grant Fitzner said. GDP in September is likely to be weakened by a one-off public holiday to mark the funeral of Queen Elizabeth. The International Monetary Fund said on Tuesday it expected British GDP to grow in 2023 but only by 0.3%.

☆ UK finance minister says growth plan will address challenges as economy shrinks
▼ + stars: | 2022-10-12 | by ( ) www.reuters.com time to read: 1 min

LONDON, Oct 12 (Reuters) - Britain's finance minister Kwasi Kwarteng said on Wednesday that the government's growth plan will address the challenges faced by the country after the latest data showed the economy had shrunk. "Our Growth Plan will address the challenges that we face with ambitious supply-side reforms and tax cuts, which will grow our economy, create more well-paid skilled jobs and in turn raise living standards for everyone," Kwarteng said in a statement. Register now for FREE unlimited access to Reuters.com RegisterReporting by Farouq Suleiman; editing by Sarah YoungOur Standards: The Thomson Reuters Trust Principles.

☆ Morning Bid: The Next Three Days
▼ + stars: | 2022-10-12 | by ( ) www.reuters.com time to read: +3 min

Well, the Bank of England's Andrew Bailey has crowed, sort of making clear the Liz Truss government can't bank on it defending markets from the fallout of an ill-conceived economic revival plan for more than three days. "You've got three days left now. You've got to get this done," Bailey said on Tuesday, referring to the pension funds. Meanwhile, the U.S. dollar is up, yen is at 24-year lows, yields are soaring, sterling is wobbling and oil is slipping. That comes days after a sweeping set of export controls published by the Biden administration aimed at cutting China off from certain semiconductor chips made anywhere in the world with U.S. equipment.

☆ UK economy unexpectedly shrinks in August, falls by 0.3%
▼ + stars: | 2022-10-12 | by ( ) www.cnbc.com time to read: +1 min

ONS figures showed that real wages in the U.K. over the three months to May experienced their steepest decline since records began in 2001. Britain's economy shrank by 0.3% in August, hit by weakness in manufacturing and maintenance work in North Sea oil and gas fields, according to official data which underscored the challenge for Prime Minister Liz Truss to speed up growth. "The economy shrank in August with both production and services falling back, and with a small downward revision to July's growth the economy contracted in the last three months as a whole," ONS Chief Economist Grant Fitzner said. Fitzner highlighted a "notable decrease" in the manufacturing sector and a greater level than usual of maintenance in the North Sea oil and gas sector which slowed output. Britain's economy looks set to slow sharply as surging inflation hits households and forces the Bank of England to raise interest rates quickly.

☆ UK pensions: There's no quick fix for the market mess
▼ + stars: | 2022-10-12 | by ( Julia Horowitz | ) edition.cnn.com time to read: +7 min

Almost 20 days after Finance Minister Kwasi Kwarteng unveiled his much-criticized plan to jumpstart the economy, sparking an investor revolt, the UK bond market and the British pound remain under huge stress — despite three emergency interventions by the central bank. The country’s central bank is in a difficult position. It’s trying to restore the UK government’s lost credibility in markets, though its toolkit isn’t designed for this kind of effort. “Investment consultants are working feverishly.”Ongoing volatility in the bond market is further complicating those efforts, as rising yields once again put hedging strategies at risk. Yet as bond yields keep rallying, not everyone is convinced that approach makes sense.

☆ BoE's Pill: UK fiscal policy must not threaten credibility
▼ + stars: | 2022-10-12 | by ( William Schomberg | ) www.reuters.com time to read: +2 min

While bond yields have risen globally all year, the sharp slump came immediately after finance minister Kwasi Kwarteng's first fiscal statement, which lacked the usual independent forecasts and included 45 billion pounds ($49.7 billion) of unfunded tax cuts. "Ensuring that this shift - in concert with other fiscal policy actions - does not bring the longer-term sustainability of the public finances or respect for the wider institutional framework for macroeconomic policy into question remains key," he said. "Maintaining the credibility and integrity of that framework supports the effectiveness of monetary policy in pursuing its own objectives," he added in a speech text published by the BoE. "At present, I am still inclined to believe that a significant monetary policy response will be required to the significant macro and market news of the past few weeks," Pill said in a speech text published by the BoE. ($1 = 0.9048 pounds)Register now for FREE unlimited access to Reuters.com RegisterReporting by David Milliken; editing by William SchombergOur Standards: The Thomson Reuters Trust Principles.

That was when the BoE moved to quell bond market turmoil triggered by the plans of the new government of Prime Minister Liz Truss for big, unfunded tax cuts. Register now for FREE unlimited access to Reuters.com Register"We have announced that we will be out by the end of this week. "My message to the funds involved and all the firms involved managing those funds: You've got three days left now. Investors are nervous that Friday's deadline for the end of the BoE's bond-buying might come too soon for some funds. The BoE press office said it had no further comment to make beyond those of Bailey on Tuesday in Washington.

☆ Sentiment in UK finance falls at fastest pace since 2019 - survey
▼ + stars: | 2022-10-12 | by ( ) www.reuters.com time to read: +1 min

LONDON, Oct 13 (Reuters) - Britain needs to restore stability to its finances to help reverse the fastest drop in financial sector sentiment in three years, a survey by business body CBI and consultants PwC said on Thursday. Profitability growth in the sector remains robust and is expected to increase at a faster pace in October to December, the CBI/PwC survey said. But sentiment in the third quarter to September fell at its fastest pace since September 2019, when it was hit by uncertainty around Brexit negotiations, the survey said. Employment in the sector is set to decline at a quicker pace in the current quarter, perhaps a reflection of the weaker sentiment, while the value of souring bank loans is expected to increase modestly, the survey said. Register now for FREE unlimited access to Reuters.com RegisterReporting by Huw Jones Editing by Bernadette BaumOur Standards: The Thomson Reuters Trust Principles.

☆ The UK's recent market turmoil wasn't caused by the mini-budget, and the chaos was a result of interest rate 'differentials', Britain's business secretary says
▼ + stars: | 2022-10-12 | by ( Carla Mozée | ) www.businessinsider.com time to read: +3 min

The turbulence in UK financial markets stems from the gap between UK and US interest rates, acob Rees-Mogg said Wednesday. The turbulence is "primarily caused by interest-rate differentials rather than by the fiscal announcement," he said. The fed funds rate in the US stands at 3%-3.25% and the UK's Bank Rate stands at 2.25%. "What has caused the effect in pension funds, because of some quite high-risk but low-probability investment strategies, is not necessarily the mini-budget. That decision was released after the Federal Reserve raised interest rates by a hefty 75 basis points, marking the third consecutive increase of that size, as it also battles inflation that's around a four-decade high.

British financial markets have been under strain since Sept. 23 when finance minister Kwasi Kwarteng announced 45 billion pounds ($50 billion) of tax cuts, without saying how they would be paid for. The Institute of Fiscal Studies think-tank has said the strategy will require 62 billion pounds of spending cuts or tax rises to stop the public debt growing - a daunting proposition after more than a decade of tight government spending. Register now for FREE unlimited access to Reuters.com RegisterTruss and Kwarteng say their tax cuts will boost economic growth and restore the public finances over the medium term. Asked if she was sticking to a pledge not to cut spending made during the Conservative leadership contest, she said: "Absolutely, absolutely." Her spokesman later said that although public spending overall would rise, "there will be deeply difficult decisions to be taken given some of the global challenges we're facing".

☆ Sentiment in UK finance falls at fastest pace since 2019, survey
▼ + stars: | 2022-10-12 | by ( ) www.reuters.com time to read: +1 min

☆ UK PM Truss says she will not cut public spending to fund tax cuts
▼ + stars: | 2022-10-12 | by ( ) www.cnbc.com time to read: +1 min

British Prime Minister Liz Truss said on Wednesday she would not cut public spending. British Prime Minister Liz Truss said on Wednesday she would not cut public spending after her government came under pressure to fund vast tax cuts that have roiled markets and sparked alarm over government finances. The Institute of Fiscal Studies (IFS) said this week that the government needed to find 62 billion pounds ($68.5 billion) of spending cuts or tax rises to stop the public debt growing. Truss was asked at her weekly parliamentary questions if she was still committed to a pledge she made during the Conservative Party leadership contest that she was not planning public spending cuts. "What we will make sure is that over the medium term the debt is falling, but we will do that not by cutting public spending but by making sure we spend public money well," she said.

☆ Britain's bond market turmoil
▼ + stars: | 2022-10-12 | by ( ) www.reuters.com time to read: +3 min

The country's financial markets have been in turmoil since finance minister Kwasi Kwarteng last month unveiled tax cuts with no details of how they would be paid for. * The Bank of England has been forced into emergency bond-buying to stem a sharp sell-off in Britain's 2.1 trillion pound ($2.3 trillion) government bond market that threatens to wreak havoc in the pension industry and increase recession risks. * The BoE interventions have highlighted a growing segment of Britain's pensions sector - liability-driven investment. MAJOR PLAYERS* BoE governor Bailey said on Tuesday on the sidelines of an IMF meeting in Washington that BoE support for the pension funds would end as planned on Friday. MARKET REACTION* The 20- and 30-year UK government bond yields both hit their highest since 2002 at 5.195% and 5.1% respectively, passing above 5% for the first time since the BoE began buying bonds on Sept. 28 to calm the turmoil.

Governor of the Bank of England, Andrew Bailey, speaks during the Bank of England's financial stability report news conference, at the Bank of England, London August 4, 2022. And what they can't allow is for the bond market to be overly volatile," said Iain Stealey, CIO of fixed income at JPMorgan Asset Management. U.S. and German 30-year borrowing costs are up just 16 and 33 bps respectively , this month and the contrast highlights the scale of selling gripping Britain's bond market. The unprecedented bond market moves triggered hefty collateral calls on hedging strategies that many funds are still struggling to meet. Bond market volatility has also raised doubts about whether the BoE can press ahead with its plan to sell some of its bond holdings, a process known as quantitative tightening (QT).

And futures now assume the inflation fight will fall solely on the BoE and expect it to triple policy rates to as high as 5.8-6% next year. On Tuesday, the independent Institute for Fiscal Studies said Kwarteng needed 62 billion pounds ($68.22 billion) of spending cuts to keep public debt sustainable over time, with borrowing this year on course for 194 billion pounds and still above 100 billion by 2026/27 - over 70 billion higher than OBR forecasts in March. QE involves the purchase of mostly gilts from commercial banks in return for interest-bearing reserves at the central bank. And, unlike other major central banks, the BoE policy rate itself is the rate paid on those bank reserves. NIESR last year urged a solution to the problem whereby Treasury and central bank reduced the maturity mismatch by swapping longer-dated gilts back to Treasury to cut duration of its portfolios.

Register now for FREE unlimited access to Reuters.com Register"We have announced that we will be out by the end of this week. "My message to the funds involved and all the firms involved managing those funds: You've got three days left now. Investors are nervous that Friday's halt to the BoE's bond-buying might come too soon for some pension funds. But a BoE spokesperson said it had been made "absolutely clear in contact with the banks at senior levels" that the Friday deadline would hold. On Wednesday, it said it was "closely monitoring" liability-driven investment (LDI) funds, which are key to pension funds, ahead of Friday's deadline.

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