UK government's U-Turn eases pressure on pound and gilts

The pound rose after the UK government changed course and said it would not scrap the higher rate of income tax, a controversial measure that had sent markets into turmoil last week and pushed the FTSE 100 down by 1.8%.

It reached its highest in 10 days against the dollar, at $1.128. The 10-year gilt yield fell 0.07 percentage points to 4.02 %. But overall, gilts are still high, a sign that the government needs to do more to regain the confidence of investors.

Over the weekend, Standard & Poor's cut the outlook on its AA rating for British sovereign debt from "stable" to "negative", saying Prime Minister Liz Truss' tax-cutting plans would lead to a continued rise in debt.

This morning, the FTSE 100 was down 1%, weighed down by banking and consumer staples stocks.

 

Things to read today:

Truss’s growth plan is nothing but a magic potion (Financial Times)

U.K.’s Central Banker Faces Inflation, a Financial Crisis and His Own Government (WSJ)

The Stocks to Buy and Sell During the UK’s Market Rout (Bloomberg)