FTSE 100 closes up slightly 1pc; Pound gains to $1.13
The Government’s U-turn on tax cuts may not protect the UK from a credit rating downgrade, S&P Global has warned.
Maxim Rybnikov, an analyst at the rating agency, said the move wouldn’t materially affect fiscal and economic projections made last week.
S&P downgraded its outlook on the UK’s AA credit rating from stable to negative in the wake of Kwasi Kwarteng’s tax-cutting fiscal plans.
It forecast that the government deficit will widen by an average 2.6pc of GDP annually to 2025, while net general government debt will continue on an upward trajectory.
Mr Rybnikov said the bulk of the impact came from energy subsidies and other tax cuts, with the additional rate of tax for highest earners cumulatively amounting to less than 0.2pc of GDP over three years.
He added: “Nevertheless, the recent reversal shows that fiscal policy remains subject to change and we will continue to monitor government announcements, including possible future fiscal consolidation measures.”
In a speech to the Conservative Party Conference, the Chancellor, Kwasi Kwarteng, brushed off concerns from markets over the country's spending plans as “a little turbulence”.
Sterling gained slightly against the dollar on Monday, rising to $1.13.
That's all for today
The Chancellor's U-turn has dominated headlines as he faced Conservative Party members after scrapping plans to end the top rate of income tax. It is not clear if it will be enough to give the UK a clean bill of health on its credit rating. S&P Global downgraded the UK's AA rating in the wake of the mini-Budget.
The pound has recovered slightly further against the dollar, to $1.13, up from last week's lows.
Telecom Plus rises 24pc on energy bargain-seeking Brits
Britons are flocking to deals bundling energy tariffs, broadband and mobile phone bills in an effort to save amid the cost-of-living crisis.
Telecom Plus, a FTSE 250 company that offers combined utility deals with the promise of savings, said it had added 86,000 new customers in the six months ending in September.
The additions took its total customers to 815,000 as consumers hunt for discounts amid surging wholesale energy prices.
Shares in Telecom Plus surged 24pc to £21.40 in trading on Monday, giving the company an overall valuation of £1.7bn
New Transport Secretary supports expanding Heathrow
The Transport Secretary has said she supports the building of a third runway at Heathrow after nearly three years of tacit opposition under Boris Johnson, Oliver Gill writes.
“I'm a supporter [of Heathrow expansion],” Anne-Marie Trevelyan said at a fringe event at the Conservative party conference. “Aviation is a really important part of our growth.”
Ms Trevelyan said expansion of Newcastle Airport had boosted the local economy of her Berwick-upon-Tweed constituency, suggesting the same impact would be seen in London and the South if Heathrow gained another runway.
An airport is an extraordinary neighbour. Little Newcastle… got an Emirates flight for the first time out to Dubai. Literally within months, you could see the shift in exports. You could see the shift in the willingness of businesses to think about exporting.
It was almost like a cartoon: ‘Build it and they will come’. And that daily flight has completely altered the north-east’s view of exporting
So I am an absolute believer, because I've seen what the opportunities for that international aviation hub brings to a local economy.
SoftBank-backed Improbable raising $100m
Improbable, the British gaming technology company, is raising another $100m as it targets profitability next year.
The British start-up, which made headlines after securing a $500m investment from Japan's SoftBank five years ago, said it hoped to break even in 2023 as a surge in brands betting on "metaverse" technology boosted its business.
Improbable develops technology used to support video games with tens of thousands of players. The infrastructure has been seized upon by brands hoping to add metaverse experiences for their customers.
The company said it would raised $100m from cryptocurrency company Elrond. Improbable has so far burned through hundreds of millions of dollars on its video game and digital simulation technology.
Among Improbable's biggest clients is Yuga Labs, a US company developing non-fungible tokens. Improbable said a portion of its revenues would be paid in Yuga's "ApeCoin" cryptocurrency.
Sterling inches up to $1.13
The Pound has recovered slightly after this morning's losses to $1.13 after falling in trading this morning.
While markets were largely unmoved by the Chancellor's speech, this afternoon, Sterling did pare back some of its earlier losses today, when it was trading at around $1.11 after recovering from lows of under $1.03 last week.
In his speech earlier, the Chancellor had admitted the mini-Budget had caused "a little turbulence" to financial markets.
Online Safety Bill will return, confirms new Digital Secretary
Michelle Donelan, the Secretary of State for Digital, Culture, Media and Sport, has confirmed the Online Safety Bill will be returning to Parliament after its progress was paused by the Conservative leadership election and the arrival of Liz Truss in No 10.
However, she said the Government would bring in changes to further protect freedom of expression under the Bill.
Donelan said: "Rest assured I'm also making changes to the Bill in relation to freedom of speech for adults."
TikTok revenues in Europe hit nearly $1bn
TikTok has seen sales at its UK business grow almost sixfold to nearly $1bn (£890m) as advertisers flock to the Chinese social media company.
TikTok’s London-headquartered international arm, which includes its European operations and its divisions outside of the US and China, reported $990m in revenues in the 12 months ending in December, according to accounts filed to Companies House, up from $172m the previous year.
The figures underline the speed of the Chinese company’s rapid rise. It has reached revenues of almost $1bn in the UK and Europe after adding advertising to its app in 2020 and six years after launching here.
TikTok’s losses were up by more than a third to $896m as it increased spending on staff, ramping up its headcount to more than 4,300 people.
The results show TikTok’s rapid growth continued throughout the coronavirus pandemic after enjoying breakout success during lockdowns as people sought distraction.
The majority of its revenues - $802m - came from advertising after TikTok added digital ads to its short-form video-sharing app in 2020. It is highly popular with Gen Z, the generation of teens and 20-somethings that brands are keen to reach.
UK revenues at TikTok grew from $51m in 2020 to $280m in 2021. Its mainland European business reported total sales of $531m.
Kwarteng pledges crackdown on 'pernicious strike action'
The Chancellor has delivered his address to the Conservative Party conference pledging low taxes, high growth and fiscal discipline hours after a u-turn on scrapping the top rate of tax.
In his speech to attendees, Kwasi Kwarteng insisted he was an "unashamedly a pro-business Conservative" and insisted the party stood for "fiscal discipline", despite a hit to the pound after the mini-budget.
The Chancellor added the Government will "shortly... publish our medium-term fiscal plan, setting out our approach" after criticism of unfunded tax cuts that were presented to MPs
He said the Government would also crackdown on "pernicious strike action" amid fears that wages are falling in real terms due to soaring inflation. Mr Kwarteng said: "We will introduce important reform to stop strike action from derailing our daily lives."
That's all from me today – thanks for following! Matthew Field is in charge for the rest of the day.
Tax cut reversal is 'good decision', says IMF chief
The move to abandon a tax cut for top earners in the UK is a "good decision", the IMF's top official has said, days after the global crisis lender attacked the original plan.
Kristalina Georgieva, IMF managing director, told reporters: "The decision the UK has taken to ease the potential pressure on their revenues is a good decision."
The IMF last week urged the Government to rethink its huge unfunded tax cut, saying fiscal stimulus was inappropriate given the inflation pressures in the UK and would make life harder for the Bank of England.
It also said it would likely increase inequality.
Ms Georgieva added: "We also know there is an engagement with the Office of Budget Responsibility and that engagement will provide further insights on what is the best policy platform for the UK to follow."
US manufacturing stumbles as orders shrink
A gauge of US manufacturing stumbled to a more than two-year low in September, moving closer to outright stagnation as orders contracted for the third time in four months.
The Institute for Supply Management’s gauge of factory activity dropped nearly two points to 50.9 – the lowest since May 2020 and only just above a contraction.
The purchasing managers group’s measure of new orders declined more than four points to 47.1, also the lowest level since the early months of the pandemic and an indication that demand is softening.
Consumer spending on merchandise is settling back and while business investment in equipment has held up, economic growth concerns are mounting as the Federal Reserve raises interest rates to combat inflation.
Timothy Fiore, chair of ISM’s Manufacturing Business Survey Committee, said: “Following four straight months of panelists’ companies reporting softening new orders rates, the September index reading reflects companies adjusting to potential future lower demand.”
The ISM PMI for manufacturing fell 1.9 points to 5.9%, a level near stalling. New orders and employment contracted but production and backlogs grew. Supplier deliveries are slowing at a slower pace. Raw materials inventories are growing and prices increased at a slower rate. pic.twitter.com/ee2mIt8m63
— Dr Thomas Kevin Swift (@DrTKSwift) October 3, 2022
Bank of England buys just £22m of bonds
The Bank of England has said it accepted offers for £22.1m of bonds in its buying programme – well below the £5bn maximum it said it was prepared to purchase.
The central bank rejected about £1.9bn of bids in its latest auction.
It takes the total size of buying so far to just under £2.7bn, compared to the £20bn potential maximum.
Porsche shares drop below IPO price
Porsche’s shares have dropped below their initial public offering price just days after going public as the German car brand fell victim to wider market turmoil.
Parent company Volkswagen defied concerns about soaring energy prices and rising interest rates to push ahead with the €75bn (£65bn) stock market float.
Porsche’s listing raised around €9.4bn (£8.2bn) in proceeds for the German automotive giant and was the country’s second largest listing ever after Deutsche Telekom’s 1996 debut.
Stuttgart-based Porsche priced its shares at €82.50 – the top end of its target range. However, they fell as much as1.8pc to €81 today.
The share price fall was in line with broader declines across European markets as stubbornly high inflation and a looming winter energy crisis continue to darken the outlook in the eurozone.
Wall Street opens higher after market rout
Wall Street's three main indices have pushed higher at the opening bell after posting their worst September in two decades.
US stocks began the fourth quarter on a positive note, although losses for Tesla capped gains on the tech-heavy Nasdaq.
The S&P 500 rose 0.7pc, while the Dow Jones was up 0.5pc. The Nasdaq gained 0.8pc.
Europe ‘at epicentre’ of global manufacturing slump as costs soar
Europe is at the epicentre of a global manufacturing slump, according to a closely watched survey that showed the bloc's two biggest economies are struggling to remain competitive.
Szu Ping Chan has more:
Activity in Germany's key manufacturing sector fell to its lowest level in two years amid soaring energy costs that continue to push up prices.
Last month, the Kremlin announced an indefinite shutdown of the key Nord Stream 1 gas pipeline that links Russia to Germany, which drove a spike in prices.
Germany's manufacturing activity fell to 47.8 in September, from 49.1 the previous month, according to the S&P Global PMI, taking it further below the 50 level that divides growth from contraction. Analysts said “a growing number of customers” had either postponed or cancelled orders due to rising prices.
French order books also shrank in September, with close to a third of businesses reporting a fall in new business as clients were also put off by higher costs.
French car manufacturers were particularly affected, the analysis showed.
Tax cut U-turn 'signifies nothing', says Rees-Mogg
Jacob Rees-Mogg said the U-turn on scrapping the highest rate of income tax was just "smoke and fury that signifies nothing" as he tried to downplay a reversal of a policy the Government had vigorously defended.
Speaking at an event at the Conservative Party conference in Birmingham, the Business Secretary said he believed the Tories could recover support and that, in politics, sometimes the Government had to back down.
Strikes and heatwave hit Mexican chain Tortilla
Rail strike disruption and the heatwave have cost Mexican chain Tortilla hundreds of thousands of pounds this year while costs are soaring, writes Hannah Boland.
Almost a third was wiped off the value of the fast food restaurant after it warned trading over the summer had been "more challenging than anticipated", due to a combination of more people going abroad for their holidays, recent rail disruption and the heatwave.
The last two cost it an estimated £250,000 in lost sales, Tortilla said. It has 84 sites in the UK, most of which are located in shopping hubs, train stations and airports.
Further rail strikes look set to hit footfall in city centres over the next few days, piling pressure on operators at a time when their costs remain sky-high.
Tortilla said the price of meat and proteins, which make up a third of costs, have risen by around 40pc since the start of the year.
Kim Kardashian fined $1.3m for social media crypto posts
Kim Kardashian has been hit with a $1.3m (£1.2m) fine for promoting a crypto asset on social media without disclosing the payment she received.
The reality TV star failed to disclose that she was paid $250,000 to publish a post on her Instagram account about EMAX tokens, a crypto asset security being offered by EthereumMax.
Without admitting or denying the Securities and Exchange Commission's findings, Ms Kardashian agreed to pay the sum, which includes $260,000 to repay the fee plus pre-judgement interest and a $1m penalty.
She also agreed not to promote any crypto assets for three years.
Gary Grensler, SEC chairman, said:
This case is a reminder that, when celebrities or influencers endorse investment opportunities, including crypto asset securities, it doesn’t mean that those investment products are right for all investors.
We encourage investors to consider an investment’s potential risks and opportunities in light of their own financial goals.
Ms Kardashian’s case also serves as a reminder to celebrities and others that the law requires them to disclose to the public when and how much they are paid to promote investing in securities.
BT shares jump on Vodafone-Three merger talks
BT shares have jumped to the top of the FTSE 100 after Vodafone confirmed it's in talks with Three over a potential merger.
The former monopoly was up 4pc in early afternoon trading as the development pushed the telecoms sector higher. Vodafone itself gained 2.3pc.
There were gains elsewhere in Europe, with Orange, Telecom Italia and Deutsche Telekom all rising.
Vodafone said it's in talks with Three parent company CK Hutchison over a possible all-stock deal.
Nasdaq dragged down by Tesla woes
The tech-heavy Nasdaq is being dragged down by a fall in Tesla shares, bucking the trend amid wider positivity on Wall Street.
Tesla fell more than 4pc in pre-market trading, as logistical challenges overshadowed its record vehicle deliveries, which were announced over the weekend.
The jitters spilled over to other tech stocks including Apple and Amazon, both of which were down 0.4pc.
Futures tracking the Nasdaq fell 0.2pc, while the S&P 500 and Dow Jones were up 0.2pc and 0.4pc respectively.
Drivers face more fuel pain as OPEC plans oil rationing to keep prices high
The global cartel of oil producing countries is planning to ration supplies to keep prices high, threatening to heap more misery on drivers, writes Matt Oliver.
Oil prices rose sharply on Monday after reports that Opec+ members are considering the biggest cut to production fuel since the pandemic.
Brent crude rose 4pc towards $89 per barrel, while futures rose by more than 2pc towards $82 a barrel.
The price rises threaten to feed through to higher costs at petrol forecourts. Fuel prices have already broken records multiple times this year but have started to decline in recent weeks as wholesale costs fall.
According to the RAC, unleaded petrol costs 162.8 pence per litre on average, while diesel sets drivers back by 180.18 pence per litre.
Government in talks with Pensions Regulator, says minister
The Government is in talks with The Pensions Regulator about a crisis in the market that forced the Bank of England to step in last week.
Chloe Smith, Secretary of State for Work and Pensions, told Bloomberg:
Colleagues are having the right meetings with The Pensions Regulator, with the Treasury and across my department as well. I can’t give you further details.
I’m glad the Bank of England was able to take the action they did last week and naturally we are keeping a very close eye on the situation.
We want this to be a thriving pensions industry in this country. That is an essential part of supporting people in their retirement.
Vodafone confirms Three merger talks
Vodafone has confirmed it's in discussions over a potential merger with mobile rival Three.
The telecoms giant said it's in talks with Three's parent company CK Hutchison over a possible deal to combine the UK businesses.
The all-stock deal would result in Vodafone owning 51pc of the combined business and CK Hutchison holding 49pc.
Vodafone said deal would give the companies the necessary scale to step up the rollout of 5G.
In a statement just published, it said:
By combining our businesses, Vodafone UK and Three UK will gain the necessary scale to be able to accelerate the rollout of full 5G in the UK and expand broadband connectivity to rural communities and small businesses.
The merged business would challenge the two already consolidated players for all UK customers and bring benefits through competitively priced access to a third reliable, high quality, and secure 5G network throughout the UK.
Shorter chips on the menu as lack of rain stunts potatoes
Supermarkets will be selling shorter chips and smaller baked potatoes after farmers warned a lack of rain this summer had hit their harvest.
Hannah Boland has the details:
Tim Rooke, chair of the National Farmers Union's potato forum, said the past few months had been "very difficult" for the industry, with the yield for those who had not irrigated their crops down between 25pc and 40pc.
He said: "Potato farming is not in a particularly good place at the moment." Mr Rooke said he did not expect there to be shortages on shelves, but that customers would "have to accept that the chips that we buy may not be as long as they normally are, and certainly the fresh potatoes that you buy from the supermarket may not just be as big as we'd hope they'd be".
"Maybe the baking potatoes won't be as big and maybe they'll have a few more blemishes on them as normal."
The UK was hit by its biggest drought in 20 years this summer, with July proving the driest it has been since records began in 1935.
Tesla shares sinks after struggle to ship cars leads to missed delivery target
Tesla has missed its electric car delivery targets despite an acceleration in the pace of its production line, blaming a shortage of car transporters.
Gareth Corfield has more:
The company said a struggle to find companies to move its vehicles meant it shipped fewer electric cars than expected in recent months.
Tesla said in a statement: "As our production volumes continue to grow, it is becoming increasingly challenging to secure vehicle transportation capacity and at a reasonable cost during these peak logistics weeks.”
The electric car maker delivered 344,000 vehicles during the three months to 30 September, falling short of the 365,000 forecast by analysts.
Shares fell 5.8pc in the pre-market in New York on Monday.
Mr Musk said on Twitter he was "smoothing out crazy end of quarter delivery wave to reduce expedite costs & relieve stress on Tesla team."
He added that he was “aiming for steadier deliveries intra-quarter.”
Vodafone and Three 'step up merger talks'
Vodafone and Three are said to have stepped up discussions over a potential merger that would create the mobile industry's biggest player by customer numbers.
Vodafone and Three parent company CK Hutchison are hopping to reach an agreement by the end of the year to establish a joint venture or combine their British operations, Sky News reports.
A long-mooted merger between the two companies would create a market-leading business with around 27m customers. That's bigger than Virgin Media O2, which merged last year, and BT-owned EE.
Hong Kong-based CK Hutchison has been exploring a sale of Three for some time, while Vodafone boss Nick Read is under pressure from shareholders to revive the company's flagging share price.
However, any deal would likely face scrutiny from industry regulator Ofcom, as well as the Competition and Markets Authority.
Gas prices fall despite Putin's cuts to Italy
Wholesale gas prices fell this morning as a rebound in Norwegian supply helped to ease concerns after Putin turned off the taps to Italy.
Over the weekend, Gazprom slashed deliveries to Italy to zero, blaming regulatory changes in Austria. It's the latest supply cut as Putin continues to use energy as a weapon against the West.
However, Norwegian supply rose this month, helping to settle market fears.
Benchmark European gas prices fell 5pc, while the UK equivalent was down 6pc.
Lib Dems: Kwarteng should be sacked after U-turn
Chancellor Kwasi Kwarteng should be given the boot after his tax U-turn, Liberal Democrat leader Sir Ed Davey has said.
Sir Ed told Sky News: "I welcome this U-turn but the unfortunate truth is that this Conservative Government is in complete chaos.
"I don't think the Chancellor has the credibility to make all the changes that are needed and I think he has to go, and I think that would really restore confidence."
He described the Government's move as a "small change", adding: "We need a far more radical overhaul of the Budget, we need it soon and we need it to be done in a transparent way, and I come to the conclusion, regrettably, that I think this Chancellor can't deliver that."
Water companies told to slash bills by £150m
Water companies across England and Wales have been told to slash £150m from customers' bills because they missed key targets.
Eleven utility companies have been fined for failings in areas such as water supply interruptions, pollution incidents and internal sewer flooding, regulator Ofwat said.
Thames Water and Southern Water performed the worst and will have to return almost £80m to customers.
But others that exceeded their targets will be able to recover more money from customers, meaning they could see their bills go up.
Severn Trent Water, which supplies millions of people with water across England, performed particularly well in the regulator's review and will be able to increase customer payments by £63m in the year ahead.
David Black, chief executive of Ofwat for England and Wales, said:
When it comes to delivering for their customers, too many water companies are falling short, and we are requiring them to return around £150m to their customers.
We expect companies to improve their performance every year; where they fail to do so, we will hold them to account.
Credit Suisse risk gauge at record high
Credit Suisse's gauge of credit risk has hit a record high while its share price slumped to a new low, adding to turmoil at the Swiss lender.
The give-year credit default swaps price of about 293 basis points is up from around 55bp at the start of the year, according to ICE Data Services.
At the same time, its shares dropped as much as 12pc in Zurich.
Ulrich Koerner, chief executive of Credit Suisse, tried to calm employees and the markets over the weekend, but his carefully-worded memo has had the opposite effect.
Housebuilders gain after tax cut U-turn
Housebuilders are outperforming the wider market this morning as gilt yields eased following the Government's embarrassing U-turn on tax cuts.
Vistry, Crest Nicholson, Bellway and Countryside were all up between 2pc and 3pc after Kwasi Kwarteng said the 45pc rate of additional tax won't be scrapped after all.
The gains came as UK bond yields fell and markets scaled back their bets on further Bank of England interest rate rises.
Housebuilders have been hit by expectations of higher interest rates, which would drive up mortgage rates, weighing on property demand and house prices.
Oil prices jump as Opec mulls big production cut
Oil prices climbed this morning amid signs Opec is mulling its biggest output cut since the pandemic.
The producer cartel is considering slashing output by more than 1m barrels a day when it meets this week in a bid to revive plunging prices.
Benchmark Brent crude jumped 4.5pc to $89 a barrel, while West Texas Intermediate was trading above $83.
Oil prices fell by a quarter in the three months to the end of September as a slowing global economy dented demand.
But a large output cut risks sparking criticism from the US and other countries that are already facing sky-high inflation driven by soaring energy prices.
'Significant risk' of gas shortages this winter, warns Ofgem
The UK is facing a "significant risk" of gas shortages this winter and could be plunged into an emergency that would lead to power stations being switched off.
That's according to regulator Ofgem, which said a second stage of a network gas supply emergency would enforced "load shedding" on the largest users such as gas-fired stations.
The comments from Grendon Thompson, Ofgem's head of wholesale market management, came in a letter accepting a request by SSE that the regulator should urgently address the risk of possible insolvencies.
SSE said that if generators were switched off, they would face "massive" imbalance charges and credit cover requirements that could drive them insolvent.
The company added: "Even if such an emergency does not occur, the risk that it could occur is likely to force generators to reduce their forward and day ahead trading, reducing liquidity in electricity markets and raising costs for electricity consumers."
Eurozone factory activity slumps amid energy crisis
Manufacturing activity across the eurozone fell further last month as the cost-of-living crisis hit consumer demand and surging energy bills limited production.
S&P's PMI fell to a 27-month low of 48.4 in September, down from 49.6 the previous month and further below the 50.0 mark indicating contraction.
An index measuring output, which feeds into a composite PMI due on Wednesday and seen as a good guide to economic health, dropped to 46.3 from 46.5, marking its fourth month of sub-50 readings.
Chris Williamson at S&P Global said:
The ugly combination of a manufacturing sector in recession and rising inflationary pressures will add further to concerns about the outlook for the euro zone economy.
Excluding the initial pandemic lockdowns, euro zone manufacturers have not seen a collapse of demand and production on this scale since the height of the global financial crisis in early 2009.
The downturn in #euro area #manufacturing steepened in September, as the #PMI slid to a 27-month low of 48.4 (Aug: 49.6). New orders continued to fall amid soaring energy prices and economic uncertainty. Read more: https://t.co/zkyerhKe0I pic.twitter.com/IxO0128BRS
— S&P Global PMI™ (@SPGlobalPMI) October 3, 2022
Reaction: Pound will fall again despite tax cut U-turn
The pound is likely to crash back towards last week's lows over the next three months, despite a partial recovery today.
That's according to Mansoor Modi-uddin, chief economist at the Bank of Singapore, who said: "I don't expect the Government to fully unwind all its proposed tax cuts without further market pressure first."
He said investors were still concerned about how the UK will fund its budget and current account deficit.
Mr Modi-uddin added: "It's politically difficult for any new Government to announce major changes in fiscal or any other policy then reverse them quickly again."
FTSE risers and fallers
The FTSE 100 has started the week firmly in the red as markets continue to baulk at the Government's mini-Budget plans.
The blue-chip index tumbled 1pc in early trading, even after Kwasi Kwarteng said the scrapping of the 45pc additional rate of income tax won't go ahead.
AstraZeneca was the biggest drag on the index, while there were falls for consumer staples including Unilever, Diageo and British American Tobacco also weighed.
Shell and BP bucked the trend, gaining 1.5pc and 2pc respectively as oil prices jumped on a potential cut to Ope output.
The domestically-focused FTSE 250 was also down 1pc. Telecom Plus jumped as much as 24pc – its biggest rise since 2001 – after a positive trading update.
Credit Suisse tumbles as boss fails to calm markets
Elsewhere, shares in Credit Suisse have tumbled at the open as investor jitters remain despite the chief executive's attempt to calm markets.
The Swiss lender dropped as much as 6.6pc in Zurich, hovering near record lows and taking this year's decline to 58pc. Credit default swaps climbed to their highest since 2009.
The Bank of England has been liaising with Credit Suisse after a statement from chief executive Ulrich Koerner on Friday mixed with a febrile atmosphere on global markets to fuel speculation over potential threats to the 166-year-old lender’s stability.
Earlier today, the bank said it had postponed the planned capital raise for its real estate fund.
Read more on this story: Bank of England monitors Credit Suisse amid market turbulence
Most of the time, it's not until markets and/or the economy head south that investors start to focus on idiosyncratic risks. And #CreditSuisse has a lot of that as well.
The 1-year implied default rate for Credit Suisse based on the current CDS spread is 2.6%. pic.twitter.com/qT4wkZaU6Q
— jeroen blokland (@jsblokland) October 3, 2022
Kwarteng: We're not looking at new austerity measures
The Chancellor has downplayed the prospect of new austerity measures to cut public spending, after reversing his plan to abolish the top rate of income tax.
Asked about the possibility of further austerity measures, Kwasi Kwarteng said: "I don't think so at all."
He told LBC: "I think what we're trying to focus on is growing the pie, growing the economy."
Labour: Whole Budget needs reversing
Labour has put out a statement in response to this morning's U-turn and, unsurprisingly, they say it's not enough.
Shadow Chancellor Rachel Reeves says the Tories have "destroyed their economic credibility and damaged trust in the British economy".
She says the Government needs to reverse its entire "economic, discredited trickle down strategy".
They need to reverse their whole economic, discredited trickle down strategy.
Their kamikaze Budget needs reversing now.
As the party of fiscal responsibility and social justice, it will come to the Labour Party to repair the damage this Tory government has done. 3/3
— Rachel Reeves (@RachelReevesMP) October 3, 2022
Traders scale back bets on interest rate rises
There's some more validation for the U-turn in rates markets, with traders paring back their expectations for further Bank of England moves.
Markets are pricing in under 125 basis points of interest rate rises in November, down from 140 basis points at the end of last week.
At the height of the market turmoil last week, traders had been betting on 200 basis points, meaning rates would rise a full two percentage points to 4.25pc.
If confirmed, the increase would still be considered a major hike. However, the easing in expectations is a sign that the Government's willingness to reconsider its fiscal plans is relieving pressure on the Bank of England to act aggressively.
Bond yields fall on tax cut U-turn
There has been some positive reaction in the markets, with gilts opening stronger following the tax-cut U-turn.
Yields on the 10-year dropped 10 basis points to 3.99pc, while the 30-year is down to 3.73pc.
FTSE 100 tumbles at the open
The FTSE 100 has dropped sharply at the open as the Government's U-turn on tax cuts shows little sign of easing market turmoil.
The blue-chip index tumbled 1.1pc to 6,815 points.
Pound wipes out gains against dollar
Well, that was short-lived. After surging around 1pc in early trading, the pound has now erased all its gains against the dollar.
Traders took comfort from reports that the Government would scrap plans to abolish the additional rate of tax, but it seems positive sentiment faded as soon as the Chancellor confirmed the move.
The pound is now trading at around $1.1179.
Kwarteng: I haven't considered resigning
Kwasi Kwarteng is now talking to the BBC following a humiliating U-turn on the income tax cut.
The Chancellor said he took responsibility for the blunder but insisted he hasn't considered resigning and stuck by what he described as a "strong growth package".
He says the Government is focused on getting away from high taxes, but says the move to scrap the 45pc additional rate was "drowning out" the rest of the interventions in the mini-Budget.
Kwarteng: We get it, and we have listened
It's confirmed – the Government is scrapped the planned abolition of the 45pc rate of additional income tax.
Chancellor Kwasi Kwarteng says it was clear the move had "become a distraction from our overriding mission to tackle the challenges facing our country".
We get it, and we have listened. pic.twitter.com/lOfwHTUo76
— Kwasi Kwarteng (@KwasiKwarteng) October 3, 2022
Pound gains on tax cut U-turn
Sterling has pushed higher amid reports the Government will announce a U-turn on its planned income tax cut.
Prime Minister Liz Truss and Chancellor Kwasi Kwarteng are said to have decided not to proceed with the crapping of the 45pc additional tax rate following a backlash from party members at conference.
We're expecting a statement from the Chancellor imminently.
OPEC+ to consider substantial oil output cut
OPEC+ is set to consider slashing oil output by more than one million barrels a day, according to delegates.
The group will meet in person on Wednesday for the first time in more than two years.
A larger-than-expected reduction would reflect the scale of the producer group’s concern that the global economy is slowing fast in the face of rapidly tightening monetary policy.
A final decision won’t be made until oil ministers meet in OPEC’s Vienna headquarters, the delegates said. The cut would be the largest since the start of the pandemic.
“OPEC+ are very focused on stronger US interest rates and its impact on emerging-market demand,” said Amrita Sen, chief oil analyst at Energy Aspects Ltd.
“Hence, they want to pre-empt any possible surpluses” in the global market."
Bank of England monitors Credit Suisse amid market turbulence
The Bank of England has been liaising with Swiss authorities after an attempt by Credit Suisse to calm nerves instead stoked fears of further turbulence in the financial system, writes Oliver Gill.
There were no major developments at the Zurich-based lender over the weekend after a statement from chief executive Ulrich Koerner on Friday mixed with a febrile atmosphere on global markets to fuel speculation over potential threats to the 166-year-old lender’s stability.
Mr Koerner told employees that Credit Suisse is at a “critical moment” as he prepares restructuring, but urged them not to confuse the “day-to-day” stock price performance with the Swiss firm’s “strong capital base and liquidity position”.
Read the full story here
Europe stock futures fall amid UK turmoil
European stock futures dropped amid concerns of economic and political turmoil in the UK, and as the challenges facing Credit Suisse Group AG weighed on sentiment.
December contracts on the Euro Stoxx 50 Index plummeted as much as 2.4pc in Asian morning trading hours and FTSE 100 futures shed as much as 1.8pc before both pared losses.
Britain's turmoil has added to headwinds for Europe investors already grappling with the fallout of Russia’s war in Ukraine as well as global concerns tied to inflation and higher rates.
'Major currencies wrestling strong US dollar'
Kwasi Kwarteng will today say that “major currencies” are “wrestling an incredibly strong US dollar”.
“I refuse to accept that it is somehow Britain’s destiny to fall into middle-income status or that the tax burden reaching a 70-year high is somehow inevitable,” he will say.
“It isn’t, and shouldn’t be. We needed a new approach, focused on raising economic growth.
“That is the only real way to deliver higher wages, more jobs and, crucially, revenue to fund our precious public services – and it is the only way to achieve long-term fiscal sustainability.
“We must stay the course. I am confident our plan is the right one.”
Read the full story on what the Chancellor is set to say here
Sterling down in early trading
Sterling fell 0.19pc to $1.1144 in early trading, however it has rebounded strongly since the Bank of England announced it would buy as much government debt as needed to restore order.
The Bank of England was last night liaising with Swiss authorities after an attempt by Credit Suisse to calm nerves instead stoked fears of further turbulence in the financial system.
In his Conservative Party conference speech today, Mr Kwarteng is set to argue that an "incredibly strong US dollar" is a problem facing all economies, rather than just the UK.
5 things to start your day
2) ‘Chaotic’ service puts west coast main line contract under threat - Avanti West Coast 'should be stripped of control', says Greater Manchester mayor
3) Dollar strength puts pressure on Jaguar Land Rover’s debts - Over a third of the £8.9bn debt held by Britain’s biggest car manufacturer is in dollars
4) Pension titan vows to back nuclear power renaissance - Phoenix Group breaks ranks with rivals to back new stations
5) Liam Halligan: The £895bn QE monster is really to blame for the market meltdown
What happened overnight
Hong Kong stocks dropped again at the start of trade on Monday, with investors looking ahead to a key US jobs report at the end of the week, while attention will also turn to the upcoming earnings season.
The Hang Seng Index lost 1pc, or 172.58 points to 17,050.25. Meanwhile, mainland Chinese markets are closed all week for a national holiday.
Tokyo stocks opened lower, extending falls on Wall Street, where fears grew that monetary tightening could lead to a global recession.
The benchmark Nikkei 225 index was down 0.89pc, or 231.30 points, at 25,705.91 in early trade, while the broader Topix index plummeted 0.73pc, or 13.48 points, to 1,822.46.
Coming up today
Economics: Manufacturing PMI (UK, US, EU)
Corporate: Joules (full-year), Renewi (trading statement)