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The new UK Finance Minister Jeremy Hunt has decided to cancel most of the policies announced by Prime Minister Liz Truss on September 13. The decision has already started yielding positive results. The pound started rising slightly against the dollar while the European futures market is doing marginally better.
Before the announcement, there was notable discontentment in the market as all sectors were relatively flat. But they have all moved in the positive direction, with Autos gaining 6.8%, while basic resources and beverages gained 5.9% and 6%, respectively.
Long-Dated Government Bonds Have Also Fallen
Recession fears weighed on expectations of more monetary policy tightening as Asia-Pacific finished mixed on Monday.
Stock futures also traded higher in the U.S. on Monday morning. Investors are expecting big earnings reports from Bank of America, while Goldman Sachs is expected to release its numbers on Tuesday.
Investors have also started adjusting their expectations for the forthcoming rate hike by the U.S. Federal Reserve. This resulted in massive price swings in the U.S. market.
In the U.K., the economy has paused its slide following Hunt’s statement on Prime Minister Truss’s adjusted economic plan. The yields on gilts (long-dated government bonds) have now fallen. 10-year gilt yields traded around 3.997% after falling by 32 basis points. Yields on 2-year and 5-year gilts also fell on Monday.
Additionally, the 20-year gilt was down 42 points, dropping by 4.439% after Hunt spoke. On the other hand, 30-year index-linked gilt yields also fell to 4.369% after dropping 42 basis points in the same period.
Hunt says almost all of the tax measures announced earlier will be jettisoned, but the energy price guarantee will not be adjusted until April. The positive note has also impacted the pound sterling as it rose by 1% against the US dollar on Monday.
China To Issue Medium-Term Lending Facility
In another development, the People’s Bank of China has released its medium-term lending facility (MLF) loans while its interest rate remains unchanged at 2.75%. The central bank also announced that the one-year rate will be kept unchanged for another month. It plans to inject 500 billion yuan ($70 billion) via the MLF.
The global economy has remained a thing of concern as energy prices continue to skyrocket. Stocks worldwide have also suffered, with major indexes remaining deep in negative territories. Governments across the globe are looking to deploy fiscal policies to cushion the impact of inflation on their economy while driving economic growth.
Read more: https://www.economywatch.com/european-markets-move-slightly-higher-as-uk-adjusts-economic-policy