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Truss backs Bank of England independence, but pound slips against dollar – business live | Business

Truss backs Bank of England independence, but pound slips lower

Prime Minister Liz Truss speaking during the final day of the Conservative Party Conference in Birmingham. Photograph: Jeff J Mitchell/Getty Images

Liz Truss has told the Conservative Party conference that its right that the Bank of England sets interest rates indepedently, having questioned the Bank’s performance during her leadership campaign.

On the final day of a troubled conference, Truss signalled to the City that central bank independence was safe, saying:

“It’s right that interest rates are independently set by the Bank of England and that politicians do not decide on this.

“The Chancellor and the [Bank of England] Governor will keep closely coordinating our monetary and fiscal policy, and the Chancellor and I are in complete lockstep on this.”

Back in August, Truss indicated she would review the Bank’s mandate.

Truss also said her government will keep an ‘iron grip’ on the nations finances, following the turmoil sparked by the mini-budget.

In a speech disrupted by Greenpeace activists (with a banner inquiring ‘Who voted for this?’), Truss also pledged to lower the tax burden – two days after scrapping the planned abolition of the 45p highest tax rate.

Truss also says her priorities are ‘growth, growth and growth’ , and pledges to get debt falling as a share of national income.

And she takes a pop at a so-called ‘anti-growth coalition’ including opposition parties, ‘vested interests’ dressed up at think tanks and Extinction Rebellion.

Truss: “I will not allow the anti-growth coalition to hold us back. Labour, Lib Dems, the SNP…vested interests dressed up as think tanks…some of the people we had in the hall earlier.”

— Lewis Goodall (@lewis_goodall) October 5, 2022

The markets don’t seem very impressed —the pound is down a cent at $1.137, a little lower than before the speech began.

Bond yields are still moving on up this morning too (but still much lower than in last week’s panic).

$GBP making session low now as Truss ramps up rhetoric against the “anti-growth coalition”

— Joumanna Bercetche 🇱🇧 (@CNBCJou) October 5, 2022

Key events

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Over in Vienna, oil ministers from Opec members and their allies are gathering at the cartel’s HQ to set production targets for November.

As flagged in the introduction, they are expected to discuss a big cut in crude output.

OPEC+, which includes Russia and Saudi Arabia, could cut between 1 and 2 million barrels a day, according to a Reuters report, although the White House has been pushing its allies not to cut production sharply.

Alexander Novak, Russian deputy prime minister, and Putin’s man to handle the OPEC+ relationship, is in Vienna — a capital of the European Union — to organize an oil production cut. https://t.co/YVtWtpKWWo

— Javier Blas (@JavierBlas) October 5, 2022

Food for thought…OPEC can cut more/longer than Biden administration can release from SPR. This OPEC meeting a wakeup call for US politicians that energy inflation is going to be STICKY.

— Dan Pickering (@pickeringenergy) October 5, 2022

Here’s Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, on the muted market reaction to the PM’s speech:

‘’As Prime Minister Liz Truss took to the stage to try and shore up her support among her party and the country, the pound fell further back and government borrowing costs rose slightly.

She may have hoped that her triple promise of growth would have calmed markets further but with nothing new to offer the table, her words have not had the desired effect so far. The pound dipped below $1.14, hovering around $1.135 and 10 year gilt yields lifted a little to whisker under 4%.

Liz Truss bounded to the stage to the lyrics of M People, hoping the title would provide an aura of optimism to her speech. But the words I’m moving on up, you’re moving on out, may not strike the right note for those homeowners worrying about renewing their fixed rate mortgages, given how so many cheap deals have been pulled over the past week.

For now she’s pledged commitment to her Chancellor, and has reiterated support for the independence of the Bank of England, but there was no mention of exactly when the independent forecast of her administration’s slash and spend policies would be made public The report from the Office of Budget Responsibility was expected to be brought forward but question marks still remain over whether this will happen. The speech will do little to quell dissent over worries that public services will bear the brunt of the tax cuts plans.

Ms Truss will still face an uphill struggle though to convince colleagues and voters that reductions in public spending, which will be necessary to fund tax cuts, won’t end up denting productivity over the longer term instead, especially if working families are made poorer.

The rise in mortgage rates will worry the government, as well as mortgage holders (and those hoping to take out a loan):

While Liz Truss was speaking it emerged that average 2-year fixed mortgage has topped 6% for first time in 14 years

What happens to mortgages now is pivotal

Govt is betting inflation and interest rates will begin to fall early next year

But what if they don’t?

— Steven Swinford (@Steven_Swinford) October 5, 2022

Sky: Kwarteng to meet high street bank chiefs amid mortgage market freeze

Sky News are reporting that Kwasi Kwarteng will meet with high street bank chiefs tomorrow to discuss the mortgage market, after hundreds of deals were pulled after the mini-budget.

The chancellor will hold talks on Thursday with executives from lenders including Barclays, Lloyds and NatWest amid “concerns about the impact of recent markets turmoil on home loans provision”, Sky says.

Here’s the story.

Lenders were forced to drop deals after the turmoil in the bond market, and the sharp increase in expectations for interest rate rises.

Deals have returned, but at much higher rates….

Courtesy of Moneyfacts, after some more rate rises yesterday the average two-year fixed mortgage has ticked over 6% for the first time since November 2008.
Average five-year rate just shy of 6% at 5.97%.

— George Nixon (@George_Nixon97) October 5, 2022

Average two year fixed rate mortgage now tops 6%

UK mortgage rates have continued to rise, hurting those looking to buy a home, or to remortgage.

According to Moneyfacts, the average two-year fixed mortgage has ticked over 6% for the first time since November 2008.

Sky News’s Ed Conway has the details:

NEW:
Moneyfacts says:
– avg 2yr fixed rate mortgage is now up to 6.07% (was 2.25% a year ago)
– avg 5yr rate up to 5.97% (was 2.55% a year ago)
Highest mortgage rates since 2008.
But that’s understating how painful these rates will feel for people (for all the reasons above👆)

— Ed Conway (@EdConwaySky) October 5, 2022

Let’s put this into perspective.
This chart shows you the avg monthly cost of repaying a mortgages (as a % of income)
With mortgage rates at 6%, they go up from 18% to 27%.
Highest mortgage burden since 1989.
This is not a projection: for those fixing mortgages now it’s a reality pic.twitter.com/mbQKOFcARQ

— Ed Conway (@EdConwaySky) October 5, 2022

After six days of gains, the pound is heading back towards its levels before the mini-budget (against the US dollar):

The pound vs the US dollar since mid-September
The pound-dollar exchange rate since mid-September Photograph: Refinitiv

Sterling has also lost half a eurocent against the euro, down to €1.144.

Brad Bechtel of Jefferies warns that the pound could fall back to $1.10 ‘in a blink of an eye’, given the volatility.

Truss is trying to rally her party around their budget plan and the roll back on the 45% tax rates seemed to a step in the right direction.

The BoE stabilizing the bond market helped the GBP/USD recover all the way back to 1.1500 overnight, and we are back through 1.1400 now. This is probably the sell zone for this pair given how from out of the woods we really are here still.

Truss backs Bank of England independence, but pound slips lower

Prime Minister Liz Truss speaking during the final day of the Conservative Party Conference in Birmingham.
Prime Minister Liz Truss speaking during the final day of the Conservative Party Conference in Birmingham. Photograph: Jeff J Mitchell/Getty Images

Liz Truss has told the Conservative Party conference that its right that the Bank of England sets interest rates indepedently, having questioned the Bank’s performance during her leadership campaign.

On the final day of a troubled conference, Truss signalled to the City that central bank independence was safe, saying:

“It’s right that interest rates are independently set by the Bank of England and that politicians do not decide on this.

“The Chancellor and the [Bank of England] Governor will keep closely coordinating our monetary and fiscal policy, and the Chancellor and I are in complete lockstep on this.”

Back in August, Truss indicated she would review the Bank’s mandate.

Truss also said her government will keep an ‘iron grip’ on the nations finances, following the turmoil sparked by the mini-budget.

In a speech disrupted by Greenpeace activists (with a banner inquiring ‘Who voted for this?’), Truss also pledged to lower the tax burden – two days after scrapping the planned abolition of the 45p highest tax rate.

Truss also says her priorities are ‘growth, growth and growth’ , and pledges to get debt falling as a share of national income.

And she takes a pop at a so-called ‘anti-growth coalition’ including opposition parties, ‘vested interests’ dressed up at think tanks and Extinction Rebellion.

Truss: “I will not allow the anti-growth coalition to hold us back. Labour, Lib Dems, the SNP…vested interests dressed up as think tanks…some of the people we had in the hall earlier.”

— Lewis Goodall (@lewis_goodall) October 5, 2022

The markets don’t seem very impressed —the pound is down a cent at $1.137, a little lower than before the speech began.

Bond yields are still moving on up this morning too (but still much lower than in last week’s panic).

$GBP making session low now as Truss ramps up rhetoric against the “anti-growth coalition”

— Joumanna Bercetche 🇱🇧 (@CNBCJou) October 5, 2022

Today’s UK PMI report show Britain’s economy is struggling, say the EY ITEM Club.

EY also warn that the slowdown will intensify in the short term, driven by market volatility, tightening financial conditions, and future rises in interest rates.

Martin Beck, chief economic advisor to the EY ITEM Club, explains:

“Following the Government’s mini-Budget, it is likely that the deterioration in the services and composite PMIs partly reflects financial market volatility turmoil and the recent rise in borrowing costs, along with pre-existing weakness in demand.

The outlook is downbeat, given that the full force of headwinds from elevated inflation, higher interest rates and cost pressures from sterling’s softness have yet to be fully realised.

Liz Truss is about to address the Conservative party conference, and reiterate her determination to change Britain.

The PM will also admit that change will bring “disruption”, and is expected to say:

The scale of the challenge is immense. War in Europe for the first time in a generation. A more uncertain world in the aftermath of Covid. And a global economic crisis.

That is why in Britain we need to do things differently. Whenever there is change, there is disruption. Not everyone will be in favour. But everyone will benefit from the result – a growing economy and a better future. That is what we have a clear plan to deliver.

Our Politics live blog is covering all the action:

The pound has softened further, ahead of the speech, now down almost a cent at $1.1385.

Julia Kollewe

Julia Kollewe

Adam Neumann, co-founder and chief executive officer of WeWork, back in 2018
Adam Neumann, co-founder and chief executive officer of WeWork, back in 2018 Photograph: VCG/Visual China Group/Getty Images

WeWork’s revenues at its UK subsidiaries more than halved last year, its latest accounts reveal.

The embattled office space company, which was founded in 2010 in New York, opened its first UK site in London in 2014. It offers workspaces around the world by the hour, day or month. The office start-up was already struggling well before the pandemic, when investors grew tired of its messianic CEO Adam Neumann, and its lack of profits, and Covid dealt it another blow because many people switched to working from home.

The latest financial results of WeWork International, the UK parent company, published on the Companies House website, provide fresh insight into its financial position. Its 2021 management fee and service income fell sharply to £22.4m from £46.7m as a result of fewer revenues from group companies following the sale of its China business in October 2020 and because of “less trading activity” in other group companies.

Even so, its pretax loss fell to £142m from £246m because of less cost sharing with other group companies, and a near-£30m decline in staff costs. Its wage bill shrank to £42m from nearly £55m, while “termination costs” were a lot less than in 2020, when WeWork laid off thousands of workers globally. Termination costs, i.e. severance packages, fell to almost £500,00 from nearly £7m in 2020.

WeWork’s UK operation employed 415 people last year, compared with 565 the year before. It also managed to reduce admin and other costs, to £27m from over £30m.

The firm said it “began to see an increase in demand in April 2021 followed by in increase in occupancy” and has continued to see an increase in occupancy this year, but says the effects of the pandemic on the economy and its business are “highly uncertain”.

As of last December, loans due to be repaid within five years totalled £574m, compared with £752m the year before.

Bond news: Britain received solid demand at an auction of a 10-year gilt today – but it paid the highest interest rate at any auction in over a decade.

The sale of £3bn-worth of the 2032 gilt was two-and-half times oversubscribed, with investors showing solid demand for UK debt.

The bonds sold at an average yield of 4.123%, the highest since a 30-year gilts in 2011, Reuters reports (though less than was paid at a syndicated sale of a 30-year green bond last week).

Gilt auction result – much healthier looking than yesterday’s.

Sale of £3 billion of 1% gilts due in 2032 received bids worth 2.5x amount sold.

Yield tail of 0.3 bps pic.twitter.com/qqUrzkscfc

— Andy Bruce (@BruceReuters) October 5, 2022

The recovery in visitors to UK high streets and retail parks slowed last month, another indication that consumers were cutting back.

Data analytics group Springboard reports:

  • The uplift in footfall from 2021 diminished for the third consecutive month in September to just +6.8%, from +8.6% in August and +15.6% in July

  • Footfall in high streets was +9.5% higher than in 2021 (+13.9% in August), +7.7% higher than 2021 in shopping centres (+7.5% in August)

  • Around half of all employees continue to work at home for at least part of the working week impacting the recovery of footfall in high streets

  • Footfall in retail parks was just +0.3% higher than in 2021 in retail parks (1.7% below 2021 in August)

Future expectations amongst UK manufacturing & services firms are down to levels only previously seen at times of extreme stress and economic downturns, the severity of which has in the past been alleviated by central bank policy easing (not on the table now of course). #PMI pic.twitter.com/XqNwZqaNwk

— Chris Williamson (@WilliamsonChris) October 5, 2022

After a strong rally yesterday, Britain’s blue-chip stock index has sunk back into the red.

The FTSE 100 is down 91 points, or 1.3%,to 6995 points with grocery groups Ocado (-4.6%) and Sainsbury (-3.5%) among the top fallers.

Tesco have dropped by 2.5% following this morning’s results.



https://www.theguardian.com/business/live/2022/oct/05/pound-rate-uk-economy-infation-mortgages-tesco-opec-oil-business-live Truss backs Bank of England independence, but pound slips against dollar – business live | Business

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