TLDR: All is well in the world again? Not quite, but certainly British and global markets celebrated the abrupt and humiliating U-turn by UK PM Liz Truss overnight after she reversed her plan to remove Britain’s 45p top tax rate.
UK gilt prices rose, which meant yields and market interest rates fell, after Chancellor of the Exchequer Kwasi Kwarteng signalled he would publish his plan to reduce debt through spending cuts of up to £18b later this month, rather than late November.
US stocks rose 3%, the US 10 year yield fell 15 basis points to 3.65% and the New Zealand dollar bounced more than a cent to 57 USc overnight as appetites for risk returned with the celebration of the market’s ‘victory’.
So what? - Now Britain faces yet more growth-sapping and politically-destabilising cuts in public services spending until at least 2024 when the next election is due, adding further to the anti-inflationary forces gathering in the Northern Hemisphere. This will add to pressure on National to either drop or delay its tax cutting plans. PM Jacinda Ardern made a point late yesterday of saying unfunded tax cuts would be gobbled up by higher inflation and mortgage rates.
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Elsewhere in the news here and overseas this morning…
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