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The press conference will happen at 2pm BST, Reuters reports.
The chancellor, Kwasi Kwarteng, will not be standing next to the prime minister, Liz Truss, when she gives her press conference this afternoon, Sky News is reporting.
Sources have said “it looks as if the deal has been done”.
Liz Truss to hold surprise press conference today
Downing Street has just announced that Liz Truss will hold a press conference later today. More on our politics live blog with Léonie Chao-Fong.
Liz Truss is to hold a surprise press conference today, presumably to execute the biggest U-turn of modern political history
— Jim Pickard (@PickardJE) October 14, 2022
Kwasi Kwarteng on our flight. Hope he’s got his laptop. Hasn’t he got an economy to sort out??
— Jack Mitchell (@jackthesticks) October 14, 2022
Eurozone runs up record trade deficit – like UK
The eurozone has run up a record trade deficit because high energy prices boosted its import bill.
The eurozone’s balance for trade in goods with the rest of the world was in the red by nearly €51bn in August, according to the EU’s statistics office Eurostat. It is the highest deficit recorded since Lithuania joined the bloc in January 2015 to become its 19th member.
The trade gap ballooned from €34bn in July and marked the tenth month of deficits for the eurozone which has recorded large surpluses in the past. The swing into the red has largely been caused by its soaring bill for energy imports.
Exports of goods rose 24% in August from a year earlier, but imports surged nearly 54%.
Britain’s trade deficit also widened to a record high in August, £7.1bn, because of the cost of natural gas, official figures showed earlier this week. The trade in fuels gap, which includes oil and gas, climbed to £9.8bn. The UK is a net importer of energy.
Here is our full story on the up to 10,000 job cuts planned by Royal Mail. Ouch.
The pound is trading 0.55% lower against the dollar at $1.11269, while the government bond rally continues, sending yields lower.
Russ Mould, investment director at the stockbroker AJ Bell, has looked at the moves in markets.
It’s been a wild ride on the markets this year and there are still plenty of opposing forces which could push and pull equities, bonds and currencies in one direction or the other.
After yesterday’s yo-yo session on Wall Street where higher than expected inflation figures initially caused a slump and then a sudden reversal, European and Asian markets have chosen to take an optimistic view and moved higher. How long that will last is another matter.
Investors need to accept that high inflation could stick around for longer and that interest rates will almost certainly move a lot higher in the near-term. It will take a lot of short-term pain to get inflation back towards central bank targets.
There was plenty of action in the UK as investors speculate about a potential government U-turn on tax cuts. That fact chancellor Kwasi Kwarteng is leaving his US trip early to return for crisis talks only stirs the speculation pot faster in terms of what might happen next. At this stage, the nation is asking if his tax cut plan or his job are toast, potentially both.
Always look at the bond market if you want to know what the smart investors are thinking, and a drop in gilt yields on Friday tells you one of two things. Either the Bank of England is hoovering up gilts sold by pension funds (pushing up the price and pulling down the yield) before the end of its support measures today, or markets believe the chancellor is going to rip up his mini-budget and start again. The smart money is probably on the latter.
Senior Tory warns Truss economic U-turn must be ‘significant’
A senior Conservative MP has said that Liz Truss must not “nibble at the edges” but instead perform a “powerful” and “significant” U-turn with its so-far disastrous economic plan, reports my colleague Jamie Grierson.
Mel Stride, the chair of parliament’s Treasury select committee, told the BBC’s Today programme:
My personal view is that it [a U-turn] should happen, we have reached a point where we need this very powerful and significant signal to the markets that fiscal credibility is firmly back on the table, and I think that means doing something right now and not delaying.
Doing something very significant too – right at the heart of that will be unwinding the position on corporation tax.
The danger here is the argument in the room lands in a place where they decide to nibble at the edges of this and I’m afraid I don’t think that will cut it, and you could end up in that circumstance in the worst of all worlds where you’ve U-turned but doesn’t settle the markets in the way we need to.
The Financial Times reported that up to £24bn of tax cuts could be reversed, including the flagship £18bn plan to cancel a scheduled increase in corporation tax next April. One person briefed on the fraught negotiations in Downing Street said: “Almost everything in the Budget is now up for grabs.”
European shares hit one-week high
As hopes of a U-turn on the UK government’s fiscal plans lift the mood among investors, European shares have hit a one-week high.
The Stoxx 600 index rose 1.2% this morning, hitting its highest level since 7 October, also boosted by last night’s rally on Wall Street. This put the index on course for a weekly rise despite losses in the first three days of the week, caused by recession fears. The FTSE 100 index in London has advanced nearly 1% to 6,914.
However, some analysts say traders have been snapping up beaten-down stocks and warn the share gains could be short-lived, as high inflation could prompt central banks to become more aggressive in raising interest rates. US inflation came in higher than expected yesterday.
European Central Bank vice president Luis de Guindos said this morning that the central bank was prepared for a possible technical recession (defined as two consecutive quarters of contraction) coupled with high inflation, which must be brought down to maintain market confidence.
Just a few hours to go before end of Bank of England’s bond-buying programme
Some pension funds may face a cliff edge at 4.30pm when the Bank of England’s emergency bond-buying programme comes to an end. It was brought in two weeks ago to limit damage to pension funds from a sudden drop in the value of UK government debt following the mini-budget.
The Bank made two big bets when it stepped in to manage the market meltdown, writes our banking correspondent Kalyeena Makortoff. First, that £65bn was enough to hoover up UK bonds – known as gilts – being dumped on the market by pension funds scrambling to raise cash to pay their banks. Second, that two weeks would be long enough for the pensions industry to sort itself out and avoid another fire sale of assets.
The first bet seems to have been sound. The Bank has so far spent £17.8bn of the £65bn earmarked for the emergency intervention. On Thursday, it spent £4.7bn, its highest daily total so far, but still well below the £10bn daily cap. But the second bet is proving much more of a gamble. It is still unclear whether all pension funds have built up a big enough cash cushion to weather further storms.
Victoria Scholar, head of investment at interactive investor, says:
It is the final day of the Bank of England’s emergency intervention, with the spotlight on the gilt market and pension funds next week once those support measures are removed. The big question is whether pension funds have done enough over the last fortnight in terms of fundraising, reducing leverage, and increasing capital buffers.
If they have, this will sharply reduce the risk of financial contagion from any further volatility in the bond market. Although the Bank of England’s intervention is set to end today, its mandate to ensure financial markets’ stability remains, suggesting that support could be reinstated if the dysfunction resumes.
Nigel Green, chief executive and founder of deVere Group, says:
Despite assertions from the Bank of England to the contrary, we expect that the UK’s central bank will extend in some form its bond-buying support beyond Friday’s self-imposed deadline. It will likely be called something other than an ‘extension’, but we expect that support will not be removed.
In the midst of such market upheaval, the Bank can’t change path now. Gilt markets are a cornerstone of the financial system and a major pillar upon which pensions, insurance, amongst other funds, rely.
On the oil markets, Brent crude, the global benchmark, has inched up 0.2% to $94.73 a barrel, while US light crude is at $89.27 a barrel, but oil prices are heading for their first weekly loss in a fortnight.
Naeem Aslam, chief market analyst at the broker Avatrade, says:
Brent and crude oil prices are on track to record their first weekly loss in nearly two weeks. Traders are still very much digesting the message from the US crude inventory data which confirmed that supply is on the rise in the United States. Remember, the United States has one path to go if it wants to increase oil supply without worrying about what OPEC+ is doing, and that is ramping up the oil supply in the country.
The tensions between the United States and OPEC+, especially with Saudi Arabia, are still intense. and this is something that oil traders are very much worried about. If these tensions do not ease off, there is a serious threat that this could lead to a supply war, and in that scenario, the United States could lose the game by a large margin.
UK government bonds (gilts) are in focus today with the Bank of England set to end its market intervention at 4.30pm BST. After a sharp selloff on Wednesday, they have rallied over the last 24 hours on hopes of changes to the government’s fiscal plans, sending yields lower (and thereby reducing government borrowing costs).
Neil Wilson, chief market analyst at Markets.com, says:
Gilt yields fell as investors speculated Truss and Kwarteng will be forced into a humiliating U-turn on tax cuts. There is not the same fear as there was a couple of days ago when Andrew Bailey laid down the law and said funds have three days to get their house in order.
Given the Bank is maintaining a hard line, we think that the market is moving on expectations that the government will back down or seek to soothe markets somehow. Could this be a false hope? Kwarteng and Truss are thus far holding the line and we only have vague speculation about a U-turn. The political reality, however, will bite sooner or later. I think this weekend will be ‘interesting’.
Kwarteng is flying back from Washington early to speak to Truss – he could be made the fall guy, which he could hardly complain about. What kind of reprieve this gives Truss – who faces a potential coup from her own party – is hard to see. But markets look a little calmer this morning – helped in no small measure by the risk-on rally sparked on Wall Street yesterday despite a hot inflation report.
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