Hello again.Prime Minister Liz Truss’s plan to revitalize growth started to sour even before her chancellor finished delivering it on Friday, with the pound crashing to its lowest since 1985 and five-year gilts posting their biggest-ever daily decline. As Chris Hughes writes in Bloomberg Opinion, get ready for the “great British fire sale.” While Therese Raphael argues, the problem may be that Truss’s plan just isn’t radical enough. Wealthy men living in London and the south of England stand to gain most from the sweeping tax cuts unveiled by Chancellor of the Exchequer Kwasi Kwarteng. The UK said it will lift the limit on bonuses that has affected global banks for most of the last decade. While that’s welcome news in the City of London, this year’s pay among top investment bankers is expected to be restrained thanks to evaporating deal flow.
After sterling dropping as low as $1.08, the next stop may be even lower than the dollar, former US Treasury Secretary Lawrence Summers said, calling the UK a “submerging market.” The Bank of England’s half-point interest-rate hike was quickly forgotten as traders priced in a full point increase in November, or even sooner?Things are calmer in Italy, where Giorgia Meloni, leader of the Brothers of Italy party, is favorite to win the general elections at the head of a right-wing coalition tomorrow. Judging by Italian bond markets at least, investors are unperturbed, but many fear the calm will not last long.
After the long, hot summer, Europe is getting ready for a cold snap, the first test of how willing people are to delay switching on the heating in a bid to save energy. Britain is still determining who will be able to access the £40 billion liquidity fund it’s creating for the energy industry, there are signs that early-morning gas demand is increasing already.Enjoy the rest of your Saturday, and we’ll be back tomorrow with a look-ahead to the coming week.