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London open: FSTE falls, sterling gains as govt ditches plan to scrap 45p tax rate
London stocks fell in early trade on Monday as sterling got a boost after the UK government abandoned plans to cut the top tax rate.
At 0825 BST, the FTSE 100 was down 0.8% at 6,838.36, while sterling was off earlier highs but still 0.3% firmer against the dollar at 1.1200. Chancellor Kwasi Kwarteng has scrapped controversial plans to abolish the top rate of tax following days of market turmoil and increasingly vocal opposition across the Conservative party.
Kwarteng said earlier: “It is clear that the abolition of the 45p tax rate has become a distraction for our overriding mission to tackle the challenges facing our country.
“As a result, I’m announcing that we are not proceeding with the abolition of the 45p tax rate. We get it, and we have listened.
“This will allow us to focus on delivering the major parts of our growth package.”
The U-turn came just 24 hours after prime minister Liz Truss insisted that the tax cut would go-ahead, telling Sunday with Laura Kuenssberg on the BBC: “I do stand by the package we announced.”
But she also said the tax cut came from Kwarteng, and that the cabinet had not discussed it. “It was a decision the chancellor made,” she said.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “The great Truss retreat on tax saw the pound surge briefly in value, jumping above $1.12, up by round 1% in a matter of minutes just after rumours swirled about the move. It’s lost some of its bounce though as the financial markets digest the latest political turmoil to beset the UK.
“The Prime Minister was hoping to carve out a reputation as the new Iron Lady, instead she will be seen as highly malleable. She has been manipulated into this U-turn after senior conservatives yesterday coming out in open revolt at the Treasury’s decision to scrap the 45p tax band for the wealthy while refusing to rule out cuts to welfare for the poorest.
“Admitting to a communication mistake rather than a serious policy mishap didn’t cut it. Now this embarrassing climb down, taking unfunded tax cuts off the table, which Chancellor Kwasi Kwarteng has called a distraction, will help reassure the markets a little that the more reckless nature of this new administration can be reined in by the Conservative party.”
In equity markets, Carnival was under the cosh again, having tanked on Friday after the cruise operator said it was expecting to report a loss for the fourth quarter. Travel company Tui also lost ground, along with easyJet and Wizz Air.
Going the other way, Telecom Plus surged as it boosted full-year profit guidance after “record” customer growth during the first half.
Essentra rose as it announced the appointment of a new chief executive officer and the sale of its filters business.
Music investment company Hipgnosis Songs Fund was trading up after saying it had refinanced its debt facilities with a new revolving credit facility.
Top 10 FTSE 100 Risers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Barratt Developments Plc | +2.60% | +8.90 | 351.10 |
| 2 |  |
Sse Plc | +2.42% | +37.00 | 1,564.50 |
| 3 |  |
Persimmon Plc | +2.18% | +27.00 | 1,264.50 |
| 4 |  |
Bp Plc | +1.75% | +7.60 | 440.70 |
| 5 |  |
Taylor Wimpey Plc | +1.65% | +1.46 | 89.76 |
| 6 |  |
Berkeley Group Holdings (the) Plc | +1.33% | +44.00 | 3,341.00 |
| 7 |  |
Shell Plc | +1.09% | +24.50 | 2,271.00 |
| 8 |  |
Bt Group Plc | +0.74% | +0.90 | 122.25 |
| 9 |  |
Itv Plc | +0.70% | +0.40 | 57.68 |
| 10 |  |
Johnson Matthey Plc | +0.68% | +12.50 | 1,845.00 |
Top 10 FTSE 100 Fallers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Carnival Plc | -8.87% | -51.60 | 530.20 |
| 2 |  |
Easyjet Plc | -5.13% | -15.20 | 281.20 |
| 3 |  |
Hargreaves Lansdown Plc | -4.66% | -40.40 | 826.80 |
| 4 |  |
Scottish Mortgage Investment Trust Plc | -4.14% | -32.40 | 750.00 |
| 5 |  |
Ocado Group Plc | -4.04% | -19.10 | 453.40 |
| 6 |  |
Tui Ag | -4.02% | -4.35 | 103.80 |
| 7 |  |
St. James’s Place Plc | -3.82% | -39.60 | 996.40 |
| 8 |  |
Melrose Industries Plc | -3.64% | -3.72 | 98.48 |
| 9 |  |
Rightmove Plc | -3.53% | -17.00 | 465.20 |
| 10 |  |
Prudential Plc | -3.49% | -31.20 | 862.60 |
US close: Stocks wrap up Q3 with further losses
Wall Street stocks closed lower on Friday as major indices wrapped up a brutal quarter with further losses.
At the close, the Dow Jones Industrial Average was up down 1.71% at 28,725.51, while the S&P 500 and the Nasdaq-100 were both 1.51% weaker at 3,585.62 and 10,575.62, respectively.
The Dow closed 500.10 points lower on Friday, extending losses recorded in the previous session as market participants continued to be concerned about future rate-hiking decisions from the Federal Reserve and the resulting impact on stocks.
With September drawing to a close, both the Dow Jones and S&P 500 were down more than 7% for the month – the worst monthly performance for the blue-chip Dow Jones since March 2020 and the biggest one-month decline for the S&P 500 since June. The Nasdaq, meanwhile, was on track for its steepest monthly loss since April.
On the macro front, last month’s personal consumption expenditure price index increased 0.3% month-on-month, according to the Bureau of Economic Analysis, with prices for goods dropping 0.3% and prices for services increasing 0.6% month-on-month.
Elsewhere, personal income rose by 0.3% from a month earlier in August, the same pace as in July and in line with market expectations, while personal spending rose 0.4% month-on-month, beating market forecasts of a 0.2% gain.
Finally, the University of Michigan‘s consumer sentiment index was revised lower to 58.6 in September, down from a preliminary reading of 59.5 but still above the 58.2 recorded in August.
No major corporate earnings were slated for release on Friday.
Monday newspaper round-up: Pensions, British Steel, Credit Suisse
The Pensions Regulator has for the first time been drafted into high-level emergency talks led by the Treasury and Bank of England as they examine measures to calm financial markets in the wake of the meltdown which followed Kwasi Kwarteng’s mini-budget. The watchdog, which oversees the £1.5tn pension sector, is understood to have been summoned into closed-door meetings of the Authorities’ Response Framework (ARF), which are triggered when an “incident or threat” could cause major disruption to financial services in the UK. – Guardian
The owner of British Steel, the UK’s second-biggest steel producer, is understood to be seeking an urgent package of financial support from the government. Jingye Group, which bought the company out of insolvency just two years ago, has told ministers that its two blastfurnaces are unlikely to remain feasible unless the Scunthorpe-headquartered company is granted financial aid, Sky News has reported. – Guardian
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. 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. – Telegraph
One of Britain’s biggest investors is preparing to back the Government’s plans for a nuclear renaissance, but only if ministers overhaul the funding model that previously led to the collapse of proposed power stations. Andy Briggs, chief executive of pensions giant Phoenix Group, said he has been in talks with the Government about investing in nuclear power infrastructure and is exploring how it could support the creation of new plants. – Telegraph
Britain is at “significant risk” of gas shortages this winter because of Russia’s war in Ukraine and undersupply in Europe, the energy regulator said. Ofgem said there was a possibility that Britain could enter a “gas supply emergency” in which supplies to some gas-fired power plants could be cut off, stopping them generating electricity. – The Times
