Sterling crisis: Markets brace for more volatility with Quarting to meet bank chiefs – Business Live | Business

Shadow health secretary Wes Streeting has warned that the turmoil in the mortgage market this week, which forced several lenders to pull deals, is just the ‘tip of the iceburg’.

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He told Sky News:

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“All of us are frankly still recovering from our jaws hitting the floors last week with that budget from Kwasi Kwarteng.

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“And the real world consequences we’re seeing overnight, the withdrawal of mortgage products, tell us about the extent to which our own Chancellor in this country has frightened the markets.

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“This is just the tip of the iceberg, if interest rates go up in the way that some people are predicting that’s going to be huge additional costs to people with mortgages.

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“And what was the Chancellor’s answer yesterday? ‘Don’t worry folks, in November I’m going to come up with some new fiscal rules – ie I’ve ignored all the ones I’ve already got and I’m rewriting the rules and making them up as I go along’.

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Streeting added that “This isn’t serious leadership – it’s a reckless gamble,”

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The key, dangerous, charge against Liz Truss and Kwasi Kwarteng is that they lack the competence to get their “new era” for the UK economy off the launchpad, our financial editor Nils Pratley explains:

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Nils warns that a lot of financial credibility has been shredded in just two trading days, writing:

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Do they understand that, when you’re running a large current account deficit and need to borrow the thick end of £200bn next year, financial markets matter?

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The prime minister and chancellor might have expected a bumpy reception, but what they got was an open revolt in markets and some extraordinary comments from grown-up economists at serious firms. “Hope is not a strategy,” said Nomura’s team, predicting parity for the pound against the dollar by year end. “Investors seem inclined to regard the UK Conservative party as a doomsday cult,” said Paul Donovan at UBS Global Wealth Management.

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While Monday morning’s record low against the dollar grabbed the headlines, sterling has also fallen about 8% on a trade-weighted basis in two months. That is a chunky move, but one dwarfed by what’s happened with gilts. It cost the government 1.9% to borrow for 10 years in early August; that rate was 3.1% a week ago and is now 4.1% as the market tries to work out how far the Bank of England will have to raise interest rates.

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Virtually nobody accepts the notion that the biggest tax cuts since 1972 can be anything other than inflationary.

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Here’s the full piece:

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Consumers are going to suffer from sterling’s tumble.

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A weak pound pushes up the cost of imported food, petrol, cars and consumer goods – which firms will pass on to consumers

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It will also drive up the cost of mortgages (as the Bank of England is expected to hike interest rates to prop up sterling), and make foreign holidays pricier.

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Here’s a full explanation:

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Giving tax cuts to the rich is not a vote winner.

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A YouGov survey for The Times has found that Labour has taken its biggest opinion lead over the Tories since the firm began polling in 2001.

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Labour are 17 percentage points ahead of the Conservatives, with 45% support, vs 28% for Liz Truss’s party.

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The largest Labour Party lead with YouGov since 2001 👇 pic.twitter.com/Q5cbBOISZK

— Karl Turner MP (@KarlTurnerMP) September 26, 2022

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The survey revealed widespread public opposition, including among Tory supporters, to the tax-cutting measures announced by the chancellor last week.

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Kwarteng’s decision to scrap the 45% rate of tax for those earning more than £150,000 was opposed by 72% of voters, including 69% who backed the Conservatives in 2019.

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Just 19 per cent of voters thought Kwarteng’s budget was “fair” — the worst polling figure since YouGov began to ask the question in 2010.

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Here’s the full story.

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The Budget in numbers:

57% think it's unfair

53% say it won't boost growth

60% think it's unaffordable

43% too risky

BUT income tax cut and NI cut very popular

— Steven Swinford (@Steven_Swinford) September 26, 2022

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Scrapping 45p rate, removing bankers bonus cap & axing corporation tax hike overwhelmingly seen as wrong priority

Public supportive of other measures such as cutting income tax & national insurance

— Steven Swinford (@Steven_Swinford) September 26, 2022

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Kwasi Kwarteng faces a fraught meeting of City bosses today at the Treasury, following the horrific market reaction to his tax-cutting mini-budget.

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Kwarteng and new City minister Andrew Griffith are due to welcome senior leaders from banks, insurance companies and asset managers today, Bloomberg reports.

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The aim of the meeting was originally to come up with some bold ideas for the government’s so-called “Big Bang 2” plans to re-energise the City.

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But the slump in the pound, and the brutal selloff in gilts, mean it will be more of a crisis summit than a convivial conversation. Kwarteng will not be able to get away with dismissing the sterling crisis as mere market gyrations.

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Bloomberg explains:

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Bankers were meant to be wowed by measures such as the end of a cap on their bonuses and the scrapping of the 45% top tax rate, and the early reaction from industry bodies was positive on Friday.

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But Monday’s markets meltdown, which sent the UK’s borrowing costs soaring, killed off those good vibes.

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Kwarteng will need to demonstrate that he understands the seriousness of the dramatic drop in the pound and gilts rather than characterizing them as short-term fluctuations, several financiers said. Attendees will want answers on how he can restore investor confidence.

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Kwarteng heads for a difficult meeting with London’s top bankers https://t.co/Qc3WdYv7Dm via @GriffithsKath_ @harrynwilson @WilliamShaw546 pic.twitter.com/WsWnNSVPTd

— Zoe Schneeweiss (@ZSchneeweiss) September 26, 2022

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Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.

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Investors are bracing for another day of sterling volatility, as the crisis created by the government’s reckless mini-budget continues to grip the markets.

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The pound is slightly higher in early trading, clinging onto the $1.08 mark, after hitting an alltime low around $1.035 yesterday morning. It’s still down 7% this month.

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Sterling is at $1.08 at the moment #GBP #USD #Dollar pic.twitter.com/uPrfbiQPf2

— Gemini Guy (@Gemini_Guy_1981) September 27, 2022

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Sterling up 1% this morning! 😃

To $1.08 🙄

— Andy Bruce (@BruceReuters) September 27, 2022

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And the pound still looks extremely vulnerable, as the Treasury and the Bank of England struggle to prevent a full-scale loss of financial market confidence.

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UK government bonds are on track for their worst month on record, going back to the 1950s, as international faith in Britain is hammered by Kwasi Kwarteng’s binge of borrowing to fund tax cuts, mainly benefiting the wealthy.

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The selloff has pushed the cost of borrowing for 10 years up to 4.1%, from 3.1% before the mini-budget.

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Jim Reid, strategist at Deutsche Bank, says:

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UK assets have remained at the eye of the storm as the negative reaction to the government’s mini-budget on Friday continued.

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The country’s government bonds were completely routed for a second day.

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The staggering slump in gilt prices in recent days has forced several mortgage providers, including Virgin Money and Skipton Building Society, to pull deals, with economists predicting that interest rates could rise to 6% by next summer.

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That would leave many households facing massive increases in mortgage repayments, which will be impossible for some to meet.

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If mortgage rates rise to 6%—as implied by markets’ current expectations for Bank Rate—the average household refinancing a 2yr fixed rate mortgage in the first half of 2023 will see *monthly* repayments jump to £1,490, from £863. Many simply won’t be able to afford this (1/2) pic.twitter.com/hkoZCcSfjJ

— Samuel Tombs (@samueltombs) September 26, 2022

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Yesterday, the Bank of England resisted pressure to implement an immediate emergency rise in interest rates, which put fresh selling of the pound.

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The pound’s calamitous slide to record lows has gripped global markets too, and even increased the risk of a global recession.

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And Labour leader Sir Keir Starmer is expected to depict Labour as the party of “sound money” and fiscal responsibility at his keynote speech to the Labour conference in Liverpool.

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The agenda

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  • 12.30pm BST: ECB president Christine Lagarde speaks on a panel on financial stability challenges related to digitalisation of financial services

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  • 1.30pm BST US durable goods orders for August

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main events

Shadow health secretary Wes Streeting has warned that the turmoil in the mortgage market this week, which forced several lenders to pull deals, is just the ‘tip of the iceburg’.

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He told Sky News:

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“All of us are frankly still recovering from our jaws hitting the floors last week with that budget from Kwasi Kwarteng.

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“And the real world consequences we’re seeing overnight, the withdrawal of mortgage products, tell us about the extent to which our own Chancellor in this country has frightened the markets.

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“This is just the tip of the iceberg, if interest rates go up in the way that some people are predicting that’s going to be huge additional costs to people with mortgages.

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“And what was the Chancellor’s answer yesterday? ‘Don’t worry folks, in November I’m going to come up with some new fiscal rules – ie I’ve ignored all the ones I’ve already got and I’m rewriting the rules and making them up as I go along’.

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Streeting added that “This isn’t serious leadership – it’s a reckless gamble,”

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The key, dangerous, charge against Liz Truss and Kwasi Kwarteng is that they lack the competence to get their “new era” for the UK economy off the launchpad, our financial editor Nils Pratley explains:

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Nils warns that a lot of financial credibility has been shredded in just two trading days, writing:

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Do they understand that, when you’re running a large current account deficit and need to borrow the thick end of £200bn next year, financial markets matter?

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The prime minister and chancellor might have expected a bumpy reception, but what they got was an open revolt in markets and some extraordinary comments from grown-up economists at serious firms. “Hope is not a strategy,” said Nomura’s team, predicting parity for the pound against the dollar by year end. “Investors seem inclined to regard the UK Conservative party as a doomsday cult,” said Paul Donovan at UBS Global Wealth Management.

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While Monday morning’s record low against the dollar grabbed the headlines, sterling has also fallen about 8% on a trade-weighted basis in two months. That is a chunky move, but one dwarfed by what’s happened with gilts. It cost the government 1.9% to borrow for 10 years in early August; that rate was 3.1% a week ago and is now 4.1% as the market tries to work out how far the Bank of England will have to raise interest rates.

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Virtually nobody accepts the notion that the biggest tax cuts since 1972 can be anything other than inflationary.

\n

“,”elementId”:”d9330675-103c-4712-a749-146597ce827f”},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

Here’s the full piece:

“,”elementId”:”4145a804-3fc1-4606-a057-06b80db1ae3e”},{“_type”:”model.dotcomrendering.pageElements.RichLinkBlockElement”,”url”:”https://www.theguardian.com/business/nils-pratley-on-finance/2022/sep/26/the-political-naivety-of-trussonomics-is-staggering”,”text”:”The political naivety of Trussonomics is staggering | Nils Pratley”,”prefix”:”Related: “,”role”:”thumbnail”,”elementId”:”88a5b199-0851-4781-baac-3c3695c4f982″}],”attributes”:{“pinned”:false,”keyEvent”:true,”summary”:false},”blockCreatedOn”:1664262273000,”blockCreatedOnDisplay”:”03.04 EDT”,”blockLastUpdated”:1664262492000,”blockLastUpdatedDisplay”:”03.08 EDT”,”blockFirstPublished”:1664262492000,”blockFirstPublishedDisplay”:”03.08 EDT”,”blockFirstPublishedDisplayNoTimezone”:”03.08″,”title”:”The political naivety of Trussonomics is staggering: Nils Prately”,”contributors”:[],”primaryDateLine”:”Tue 27 Sep 2022 03.46 EDT”,”secondaryDateLine”:”First published on Tue 27 Sep 2022 02.35 EDT”},{“id”:”63329e3b8f08d07ba0ad6c98″,”elements”:[{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

Consumers are going to suffer from sterling’s tumble.

“,”elementId”:”d4a2de95-efb2-4777-9a0a-980ecf748833″},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

A weak pound pushes up the cost of imported food, petrol, cars and consumer goods – which firms will pass on to consumers

“,”elementId”:”0391d760-d7be-4d5a-b678-8eaaa2ce3d5b”},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

It will also drive up the cost of mortgages (as the Bank of England is expected to hike interest rates to prop up sterling), and make foreign holidays pricier.

“,”elementId”:”ddad728a-41b1-459d-879b-bdbdf823c4f3″},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

Here’s a full explanation:

“,”elementId”:”e7d244f5-3134-4a37-8d8e-038f950d3542″},{“_type”:”model.dotcomrendering.pageElements.RichLinkBlockElement”,”url”:”https://www.theguardian.com/business/2022/sep/26/shock-after-shock-how-the-weaker-pound-could-affect-you”,”text”:”‘Shock after shock’: how the weaker pound could affect you”,”prefix”:”Related: “,”role”:”thumbnail”,”elementId”:”b45fb2ff-12f7-4aca-98b0-fa80a310ffcc”}],”attributes”:{“pinned”:false,”keyEvent”:true,”summary”:false},”blockCreatedOn”:1664261691000,”blockCreatedOnDisplay”:”02.54 EDT”,”blockLastUpdated”:1664261816000,”blockLastUpdatedDisplay”:”02.56 EDT”,”blockFirstPublished”:1664261816000,”blockFirstPublishedDisplay”:”02.56 EDT”,”blockFirstPublishedDisplayNoTimezone”:”02.56″,”title”:”What the weak pound means for you”,”contributors”:[],”primaryDateLine”:”Tue 27 Sep 2022 03.46 EDT”,”secondaryDateLine”:”First published on Tue 27 Sep 2022 02.35 EDT”},{“id”:”63329bdb8f08d07ba0ad6c8e”,”elements”:[{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

Giving tax cuts to the rich is not a vote winner.

“,”elementId”:”c883f866-391a-47b3-a326-0b695dcd5e61″},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

A YouGov survey for The Times has found that Labour has taken its biggest opinion lead over the Tories since the firm began polling in 2001.

“,”elementId”:”7ff3ff04-0301-4263-b6cb-de08ce79d13a”},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

Labour are 17 percentage points ahead of the Conservatives, with 45% support, vs 28% for Liz Truss’s party.

“,”elementId”:”5d314fb9-5938-4285-8b07-30e53497e45c”},{“_type”:”model.dotcomrendering.pageElements.TweetBlockElement”,”html”:”

The largest Labour Party lead with YouGov since 2001 👇 pic.twitter.com/Q5cbBOISZK

— Karl Turner MP (@KarlTurnerMP) September 26, 2022

\n”,”url”:”https://twitter.com/KarlTurnerMP/status/1574519629443399680″,”id”:”1574519629443399680″,”hasMedia”:false,”role”:”inline”,”isThirdPartyTracking”:false,”source”:”Twitter”,”elementId”:”d07c32ec-0227-4a47-9a40-1e4a02dc2eb5″},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

The survey revealed widespread public opposition, including among Tory supporters, to the tax-cutting measures announced by the chancellor last week.

“,”elementId”:”3de4cbe1-ffe3-4149-bba2-26d23cece1b8″},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

Kwarteng’s decision to scrap the 45% rate of tax for those earning more than £150,000 was opposed by 72% of voters, including 69% who backed the Conservatives in 2019.

“,”elementId”:”de80740c-1a1b-4fad-ad94-dbafbd4c90a1″},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

Just 19 per cent of voters thought Kwarteng’s budget was “fair” — the worst polling figure since YouGov began to ask the question in 2010.

“,”elementId”:”a95bd6b9-3c39-4933-88dc-233d4e4cb407″},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

Here’s the full story.

“,”elementId”:”e99b3c46-22ee-4acc-8160-da8101eb0f55″},{“_type”:”model.dotcomrendering.pageElements.TweetBlockElement”,”html”:”

The Budget in numbers:

57% think it's unfair

53% say it won't boost growth

60% think it's unaffordable

43% too risky

BUT income tax cut and NI cut very popular

— Steven Swinford (@Steven_Swinford) September 26, 2022

\n”,”url”:”https://twitter.com/Steven_Swinford/status/1574498187750129690″,”id”:”1574498187750129690″,”hasMedia”:false,”role”:”inline”,”isThirdPartyTracking”:false,”source”:”Twitter”,”elementId”:”8a01a55a-7430-4869-99fa-dea085e7fc7e”},{“_type”:”model.dotcomrendering.pageElements.TweetBlockElement”,”html”:”

Scrapping 45p rate, removing bankers bonus cap & axing corporation tax hike overwhelmingly seen as wrong priority

Public supportive of other measures such as cutting income tax & national insurance

— Steven Swinford (@Steven_Swinford) September 26, 2022

\n”,”url”:”https://twitter.com/Steven_Swinford/status/1574498425684606989″,”id”:”1574498425684606989″,”hasMedia”:false,”role”:”inline”,”isThirdPartyTracking”:false,”source”:”Twitter”,”elementId”:”f534e4bc-ac0b-4f53-8813-360afda33b34″}],”attributes”:{“pinned”:false,”keyEvent”:true,”summary”:false},”blockCreatedOn”:1664261083000,”blockCreatedOnDisplay”:”02.44 EDT”,”blockLastUpdated”:1664261521000,”blockLastUpdatedDisplay”:”02.52 EDT”,”blockFirstPublished”:1664261521000,”blockFirstPublishedDisplay”:”02.52 EDT”,”blockFirstPublishedDisplayNoTimezone”:”02.52″,”title”:”Labour surges in polls as voters recoil from mini-budget”,”contributors”:[],”primaryDateLine”:”Tue 27 Sep 2022 03.46 EDT”,”secondaryDateLine”:”First published on Tue 27 Sep 2022 02.35 EDT”},{“id”:”633294c78f0877eea340605a”,”elements”:[{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

Kwasi Kwarteng faces a fraught meeting of City bosses today at the Treasury, following the horrific market reaction to his tax-cutting mini-budget.

“,”elementId”:”d681f8e9-2cf7-453f-9842-c3dac4e1b46a”},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

Kwarteng and new City minister Andrew Griffith are due to welcome senior leaders from banks, insurance companies and asset managers today, Bloomberg reports.

“,”elementId”:”d9d611e7-fe7f-4b40-80e0-cea0c76d8424″},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

The aim of the meeting was originally to come up with some bold ideas for the government’s so-called “Big Bang 2” plans to re-energise the City.

“,”elementId”:”9d77fa01-25f1-4f2b-9452-03b9853fcd87″},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

But the slump in the pound, and the brutal selloff in gilts, mean it will be more of a crisis summit than a convivial conversation. Kwarteng will not be able to get away with dismissing the sterling crisis as mere market gyrations.

“,”elementId”:”85a6917e-39d1-4abb-b06c-0870fe3dbc5e”},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

Bloomberg explains:

“,”elementId”:”3ee3054b-2969-4494-a3aa-a58817f0b5e0″},{“_type”:”model.dotcomrendering.pageElements.BlockquoteBlockElement”,”html”:”

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Bankers were meant to be wowed by measures such as the end of a cap on their bonuses and the scrapping of the 45% top tax rate, and the early reaction from industry bodies was positive on Friday.

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But Monday’s markets meltdown, which sent the UK’s borrowing costs soaring, killed off those good vibes.

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Kwarteng will need to demonstrate that he understands the seriousness of the dramatic drop in the pound and gilts rather than characterizing them as short-term fluctuations, several financiers said. Attendees will want answers on how he can restore investor confidence.

\n

“,”elementId”:”d73fe188-996b-4082-ad10-a032c1260cf7″},{“_type”:”model.dotcomrendering.pageElements.TweetBlockElement”,”html”:”

Kwarteng heads for a difficult meeting with London’s top bankers https://t.co/Qc3WdYv7Dm via @GriffithsKath_ @harrynwilson @WilliamShaw546 pic.twitter.com/WsWnNSVPTd

— Zoe Schneeweiss (@ZSchneeweiss) September 26, 2022

\n”,”url”:”https://twitter.com/ZSchneeweiss/status/1574484201059061761″,”id”:”1574484201059061761″,”hasMedia”:false,”role”:”inline”,”isThirdPartyTracking”:false,”source”:”Twitter”,”elementId”:”a31e6d14-3ff8-4b5a-85ae-b1e01efb7557″}],”attributes”:{“pinned”:false,”keyEvent”:true,”summary”:false},”blockCreatedOn”:1664260508000,”blockCreatedOnDisplay”:”02.35 EDT”,”blockLastUpdated”:1664260646000,”blockLastUpdatedDisplay”:”02.37 EDT”,”blockFirstPublished”:1664260646000,”blockFirstPublishedDisplay”:”02.37 EDT”,”blockFirstPublishedDisplayNoTimezone”:”02.37″,”title”:”Kwarteng facing difficult meeting with London’s top bankers today”,”contributors”:[],”primaryDateLine”:”Tue 27 Sep 2022 03.46 EDT”,”secondaryDateLine”:”First published on Tue 27 Sep 2022 02.35 EDT”},{“id”:”63328caa8f0877eea340600e”,”elements”:[{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.

“,”elementId”:”c96c676a-9183-4b93-bdae-1446d009b51d”},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

Investors are bracing for another day of sterling volatility, as the crisis created by the government’s reckless mini-budget continues to grip the markets.

“,”elementId”:”ef919ab5-70bf-47c1-a893-78f8c060f5ee”},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

The pound is slightly higher in early trading, clinging onto the $1.08 mark, after hitting an alltime low around $1.035 yesterday morning. It’s still down 7% this month.

“,”elementId”:”dafccf5a-ed8c-4259-a25e-7e4489fa7a0e”},{“_type”:”model.dotcomrendering.pageElements.TweetBlockElement”,”html”:”

Sterling is at $1.08 at the moment #GBP #USD #Dollar pic.twitter.com/uPrfbiQPf2

— Gemini Guy (@Gemini_Guy_1981) September 27, 2022

\n”,”url”:”https://twitter.com/Gemini_Guy_1981/status/1574638409489973248″,”id”:”1574638409489973248″,”hasMedia”:false,”role”:”inline”,”isThirdPartyTracking”:false,”source”:”Twitter”,”elementId”:”78cd1268-0a38-48f5-9144-a9e14a0b1305″},{“_type”:”model.dotcomrendering.pageElements.TweetBlockElement”,”html”:”

Sterling up 1% this morning! 😃

To $1.08 🙄

— Andy Bruce (@BruceReuters) September 27, 2022

\n”,”url”:”https://twitter.com/BruceReuters/status/1574638733760073728″,”id”:”1574638733760073728″,”hasMedia”:false,”role”:”inline”,”isThirdPartyTracking”:false,”source”:”Twitter”,”elementId”:”71ead3a3-4a51-49d6-a567-9e357a6462fe”},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

And the pound still looks extremely vulnerable, as the Treasury and the Bank of England struggle to prevent a full-scale loss of financial market confidence.

“,”elementId”:”37587f61-26f2-40ec-b877-a2b2a584886c”},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

UK government bonds are on track for their worst month on record, going back to the 1950s, as international faith in Britain is hammered by Kwasi Kwarteng’s binge of borrowing to fund tax cuts, mainly benefiting the wealthy.

“,”elementId”:”13d1eede-36fd-4885-b70f-724a8220ce1b”},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

The selloff has pushed the cost of borrowing for 10 years up to 4.1%, from 3.1% before the mini-budget.

“,”elementId”:”ecee7898-4797-4391-95c2-ba2db58ed8a3″},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

Jim Reid, strategist at Deutsche Bank, says:

“,”elementId”:”9851546a-12cc-4b5f-804d-f9691ad300c8″},{“_type”:”model.dotcomrendering.pageElements.BlockquoteBlockElement”,”html”:”

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UK assets have remained at the eye of the storm as the negative reaction to the government’s mini-budget on Friday continued.

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The country’s government bonds were completely routed for a second day.

\n

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The staggering slump in gilt prices in recent days has forced several mortgage providers, including Virgin Money and Skipton Building Society, to pull deals, with economists predicting that interest rates could rise to 6% by next summer.

“,”elementId”:”34b842e0-37f8-4319-9fdd-42eaf9a78a8b”},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

That would leave many households facing massive increases in mortgage repayments, which will be impossible for some to meet.

“,”elementId”:”21f942cc-9d28-4da7-b338-ad5e25b2001b”},{“_type”:”model.dotcomrendering.pageElements.TweetBlockElement”,”html”:”

If mortgage rates rise to 6%—as implied by markets’ current expectations for Bank Rate—the average household refinancing a 2yr fixed rate mortgage in the first half of 2023 will see *monthly* repayments jump to £1,490, from £863. Many simply won’t be able to afford this (1/2) pic.twitter.com/hkoZCcSfjJ

— Samuel Tombs (@samueltombs) September 26, 2022

\n”,”url”:”https://twitter.com/samueltombs/status/1574429056593977344″,”id”:”1574429056593977344″,”hasMedia”:false,”role”:”inline”,”isThirdPartyTracking”:false,”source”:”Twitter”,”elementId”:”607b2445-bddb-4dfa-a90c-b8efcc7f3398″},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

Yesterday, the Bank of England resisted pressure to implement an immediate emergency rise in interest rates, which put fresh selling of the pound.

“,”elementId”:”f7fb5dd1-f3c9-4f7c-bdff-7ca6f0230388″},{“_type”:”model.dotcomrendering.pageElements.RichLinkBlockElement”,”url”:”https://www.theguardian.com/business/2022/sep/26/pound-comes-under-new-pressure-after-bank-england-fails-announce-rate-hike”,”text”:”Pound comes under new pressure after Bank of England fails to raise rates”,”prefix”:”Related: “,”role”:”thumbnail”,”elementId”:”2e3b4c26-9f3a-40de-82dd-7c8caf59ca0b”},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

The pound’s calamitous slide to record lows has gripped global markets too, and even increased the risk of a global recession.

“,”elementId”:”11caae2a-1cef-404b-99a0-f40e88950e6a”},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

And Labour leader Sir Keir Starmer is expected to depict Labour as the party of “sound money” and fiscal responsibility at his keynote speech to the Labour conference in Liverpool.

“,”elementId”:”38049133-23ba-43f7-8dfe-01e0973fba17″},{“_type”:”model.dotcomrendering.pageElements.RichLinkBlockElement”,”url”:”https://www.theguardian.com/politics/2022/sep/26/labour-conference-starmer-party-financial-responsibility”,”text”:”‘Coming back to finish the job’: Starmer aims to reclaim centre ground”,”prefix”:”Related: “,”role”:”thumbnail”,”elementId”:”83f6e887-c23a-4866-a697-50834961f1f5″},{“_type”:”model.dotcomrendering.pageElements.SubheadingBlockElement”,”html”:”

The agenda

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    \n

  • 12.30pm BST: ECB president Christine Lagarde speaks on a panel on financial stability challenges related to digitalisation of financial services

  • \n

  • 1.30pm BST US durable goods orders for August

  • \n

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filters beta

Mohamed El-Erian, chief economic adviser at Allianz, says the sudden increase in UK government bond yields in the past few days is equivalent to Queens Park Rangers’ 5-0 victory over Manchester United.

El-Arian (a QPR fan) told Today:

A move in yields, 100 basis points, up 25 basis points in two days is somewhere between the unthinkable and the unexpected.

It happened, and now the economy is adjusting to it, that’s the concern.

[Today presenter Nick Robinson (a Man United fan) points out that 5-0 losses happens ‘rather too often these days’]

The next few days will be critical in determining the impact of the crisis on mortgages, according to Julie Ann Haines, chief executive of the Principality Building Association.

Haines told Today there have been “very significant increases” in mortgage rates this year, adding an additional £3,000 to £4,000 to the average mortgage of £250,000.

What the markets do in the next 10 days is really very important in determining the size of the impact.

Sterling fell against all major currencies in the past week, and almost all other currencies:

Of the 150 or so currencies Bloomberg tracks, the British Pound is down against every single one from last week apart from the Chilean Peso, Gibraltar Pound, Falkland Islands Pound, St. Helena Pound. pic.twitter.com/Ervic7Fpz6

— David Ingles (@DavidInglesTV) September 27, 2022

\n”,”url”:”https://twitter.com/DavidInglesTV/status/1574599901706858497″,”id”:”1574599901706858497″,”hasMedia”:false,”role”:”inline”,”isThirdPartyTracking”:false,”source”:”Twitter”,”elementId”:”22fd794c-52d8-472e-9630-17f1b5bb0a8d”}}”>

Of the roughly 150 currencies tracked by Bloomberg, the pound has fallen against every currency from last week except for the Chilean peso, Gibraltar pound, Falkland Islands pound and Saint Helena pound. pic.twitter.com/Ervic7Fpz6

– David InglesTV (@DavidInglesTV) September 27 2022

An intro for the ages, via @GeorgeWParker https://t.co/kqUTMde9u4 pic.twitter.com/MubBmcO65V

— Matthew Garrahan (@MattGarrahan) September 26, 2022

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Street View: Mortgage holders face ‘huge’ extra costs if rates jump

Shadow Health Minister Wes Streeting warned of the turmoil in the mortgage market this week, which led to this many lenders to pull deals, It is just “the tip of the iceberg”.

He told Sky News:

“We are all frankly still recovering from our jaws hitting the floors last week with this budget from Quasi Quarting.

“And the real-world consequences we’re seeing overnight, the recall of mortgage products, tell us the extent to which our advisor in this country has scared the markets.

“That’s just the tip of the iceberg, if interest rates go up the way some people expect, that would be a huge additional cost for people with mortgages.

“And what was the advisor’s answer yesterday? Don’t worry guys, in November I’m going to make some new financial rules—for example, I’ve ignored all the rules I already had and I’m rewriting and making the rules as I go along.”

Streeting added that “this is not serious driving – it is a reckless gamble.”

The political naivety of astounding aesthetics: Nils Brightley

The key, dangerous, charge against Liz Gears And the Kwasi Quarting is that they lack the competence to get their “new age” of the British economy off the launch pad, our financial editor Nils Pratley Explain:

Nils He warns against ripping off a great deal of financial credibility in just two trading days, writing:

Do they understand that, when you have a large current account deficit and Need to borrow £200 billion next yearAre financial markets important?

The prime minister and chancellor may have expected a bumpy reception, but what they got was an open revolution in the markets and some unusual comments from top economists at serious business. “Hope is not a strategy,” Nomura’s team said, predicting parity between the pound against the dollar by the end of the year. “Investors seem inclined to view the UK Conservative Party as a doomsday cult,” said Paul Donovan of UBS Global Wealth Management.

While Monday morning’s record drop against the dollar made headlines, sterling was also down about 8% on a two-month trade-weighted basis. This is a chunky move, but it paled in comparison to what happened with gold. It cost the government 1.9% to borrow for 10 years in early August. That rate was 3.1% a week ago and is now 4.1% as the market tries to see how far the BoE will have to raise rates.

Virtually no one accepts the idea that the biggest tax cuts since 1972 could be anything other than inflation.

over here full piece:

The sterling crisis, and the government’s mishandling of the situation, dominate the front pages, with many describing the pound’s weakness to hit a record low.

The guardian Leading with “The sterling crisis deepens as Truss’ strategy unfolds,” Reports The government was struggling to prevent a widespread loss of financial markets’ confidence in its economic strategy.

Guardian front page, Tuesday 27 September 2022: Sterling crisis deepens as Truss’s strategy unravels pic.twitter.com/GhKPgon1w9

— The Guardian (@guardian) September 26, 2022

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The financial times “BoE and Treasury fail to calm market nerves over UK finances”. The newspaper says that a statement issued by the bank “shattered the market’s hopes for an emergency rate hike to support the pound.”

Just published: front page of the Financial Times, UK edition, Tuesday 27 September https://t.co/fEOHVUzmlq pic.twitter.com/04u6OHaPee

— Financial Times (@FinancialTimes) September 26, 2022

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The times It led to the central bank pledging to act after the pound’s fall with its headline “Bank vows to intervene after day of turmoil”.

Tuesday's Times: Bank vows to step in after day of turmoil #TomorrowsPapersToday #TheTimes #Times pic.twitter.com/IbfayQDud3

— Tomorrows Papers Today (@TmorrowsPapers) September 26, 2022

\n”,”url”:”https://twitter.com/TmorrowsPapers/status/1574515392101376027″,”id”:”1574515392101376027″,”hasMedia”:false,”role”:”inline”,”isThirdPartyTracking”:false,”source”:”Twitter”,”elementId”:”189215d5-5329-400e-9fd0-00107a781837″}}”/>

but the pass Take comfort from Kwasi Quarting’s pledge to define his debt reduction strategy (Not for two months!).

Tuesday's Express front page – Don't panic! We have got a plan to cut debt#TomorrowsPapersToday https://t.co/9ZAwTOycB0 pic.twitter.com/IC74P0wtso

— Daily Express (@Daily_Express) September 26, 2022

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over here The full tour, by my colleague Virginia Harrison.

What does a weak pound mean to you

Consumers will suffer from a sterling falter.

A weaker pound increases the cost of importing food, gasoline, cars and consumer goods – which companies will pass on to consumers

It will also increase the cost of mortgages (the Bank of England is expected to raise interest rates to prop up the pound), and make overseas vacations more expensive.

Here is a full explanation:

Seema Shahchief strategist at owner worldwide Investors Which manages about $500 billion in assets, warned that it is difficult to know how far the pound will fall:

“Once the market starts moving with that kind of momentum, it’s hard to put a number on where (the pound) is going to drop.

But as an investor you take a long view. If I look at the UK as a place to invest over five years, that for me is no. “

Pound steadies as markets expect Bank of England action to prop up UK currency https://t.co/Nia1OF5r6e

— Sky News (@SkyNews) September 27, 2022

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Employment rises in polls as voters retreat from mini-budget

give Tax cuts for the rich Not the winner of the vote.

A YouGov survey for The Times found that Labor has held the biggest lead in opinion over the Conservative Party since the company began polling in 2001.

the work 17 percentage points ahead of the Conservative Party by 45% to Liz Truss’s 28%.

The largest Labour Party lead with YouGov since 2001 👇 pic.twitter.com/Q5cbBOISZK

— Karl Turner MP (@KarlTurnerMP) September 26, 2022

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The poll revealed widespread public opposition, including among Tory supporters, to the tax cut measures announced by the chancellor last week.

72% of voters opposed Kwarteng’s decision to scrap the 45% tax rate for those earning more than £150,000, including 69% who backed the Conservatives in 2019.

Only 19 per cent of voters thought Kwarteng’s budget was “fair” – the worst turnout since YouGov began asking the question in 2010.

Here’s the full story.

The Budget in numbers:

57% think it's unfair

53% say it won't boost growth

60% think it's unaffordable

43% too risky

BUT income tax cut and NI cut very popular

— Steven Swinford (@Steven_Swinford) September 26, 2022

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Budget in numbers:

57% think it is unfair

53% say it will not boost growth

60% think it can’t be tolerated

43% too risky

But lowering income tax and lowering NI is very popular

– Stephen Swinford (@Steven_Swinford) September 26, 2022

Scrapping 45p rate, removing bankers bonus cap & axing corporation tax hike overwhelmingly seen as wrong priority

Public supportive of other measures such as cutting income tax & national insurance

— Steven Swinford (@Steven_Swinford) September 26, 2022

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Eliminating the 45p rate, removing the bankers bonus cap, and eliminating a corporate tax increase widely seen as a wrong priority

Public support for other measures such as lowering income tax and national insurance

– Stephen Swinford (@Steven_Swinford) September 26, 2022

Kwarteng is having a tough encounter with top bankers in London today

Kwasi Kwarteng faces a charged meeting of Citi chiefs today at the Treasury, after the market’s shocking reaction to his mini-budget to cut taxes.

Today, Kwarteng and new city minister Andrew Griffith are set to welcome top leaders from banks, insurers and asset managers, Bloomberg reports.

The meeting was originally intended to come up with some bold ideas for the government’s so-called “Big Bang 2” plans to revitalize the city.

But the slump in sterling, and the brutal sell-off in gold, means it will be more of the culmination of a crisis than an interesting conversation. Kwarteng won’t be able to escape from class pound sterling crisis Just market fluctuations.

Bloomberg explains:

Bankers were supposed to be impressed with measures such as ending their bonus cap and scrapping the highest tax rate of 45%, and the early reaction from industry bodies on Friday was positive.

But Monday’s market crash, which sent borrowing costs up in the UK, wiped out those good sentiments.

Kwarteng will need to demonstrate that he understands the seriousness of a significant drop in sterling and gold rather than describing it as short-term volatility, many financiers said. Attendees will want answers on how to restore investor confidence.

Kwarteng heads for a difficult meeting with London’s top bankers https://t.co/Qc3WdYv7Dm via @GriffithsKath_ @harrynwilson @WilliamShaw546 pic.twitter.com/WsWnNSVPTd

— Zoe Schneeweiss (@ZSchneeweiss) September 26, 2022

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Introduction: The sterling crisis is sweeping the markets

Good morning, and welcome to our renewed coverage of business, the global economy, and financial markets.

Investors are bracing for another day of volatility in the pound, as the crisis created by the government’s reckless small budget continues to grip the markets.

The pound rose slightly in early trading, clinging to the $1.08 mark, after hitting an all-time low near $1.035 yesterday morning. It’s still down 7% this month.

Sterling is at $1.08 at the moment #GBP #USD #Dollar pic.twitter.com/uPrfbiQPf2

— Gemini Guy (@Gemini_Guy_1981) September 27, 2022

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Sterling up 1% this morning! 😃

To $1.08 🙄

— Andy Bruce (@BruceReuters) September 27, 2022

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Sterling is up 1% this morning! 😃

to 1.08 USD

– Andy Bruce (@BruceReuters) September 27 2022

Sterling continues to look very weak, as the Treasury and Bank of England struggle to prevent a widespread loss of confidence in financial markets.

UK government bonds are on their way to their worst month ever, Back in the fifties of the last centuryas international faith in Britain sways due to Kwasi Kwarteng’s appetite to borrow to fund tax cuts, benefiting mainly the wealthy.

The sale pushed the 10-year borrowing cost to 4.1%, from 3.1% before the mini-budget.

Jim Reedstrategist in Deutsche BankSays:

British assets remained at the center of the storm as the negative reaction to the government’s mini-budget continued on Friday.

The country’s government bonds were fully geared for a second day.

The stunning drop in gold prices in recent days has forced several mortgage providers, including Virgin Money and Skipton Building Society, to strike deals, with economists predicting interest rates could rise to 6% by next summer.

This would leave many families facing huge increases in mortgage payments, which would be impossible for some to meet.

If mortgage rates rise to 6%—as implied by markets’ current expectations for Bank Rate—the average household refinancing a 2yr fixed rate mortgage in the first half of 2023 will see *monthly* repayments jump to £1,490, from £863. Many simply won’t be able to afford this (1/2) pic.twitter.com/hkoZCcSfjJ

— Samuel Tombs (@samueltombs) September 26, 2022

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If mortgage rates rise to 6% – as evidenced by current market expectations of the bank rate – the average household refinancing of a two-year flat rate mortgage in the first half of 2023 would see *monthly payments* jump to £1,490, from £863. Many simply will not be able to stand this (1/2) pic.twitter.com/hkoZCcSfjJ

Samuel’s Tombs (samueltombs) September 26, 2022

Yesterday the Bank of England resisted pressure to implement an immediate emergency rate hike, which led to fresh selling of the Pound Sterling.

The catastrophic slide of the pound to record lows has gripped global markets as well, and even increased the risk of a global recession.

Labor leader Sir Keir Starmer is expected to portray Labor as a party of “good money” and fiscal responsibility in his keynote address to the Labor Conference in Liverpool.

schedule of work

  • 12:30 GMT: European Central Bank President Christine Lagarde speaks at a panel discussion on financial stability challenges related to the digitization of financial services

  • 1.30pm GMT US Durable Goods Orders for August

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