CLOSING UPDATE – London’s FTSE 100 index closed up 0.2% and the FTSE 250 closed up 0.7% after a turbulent day of trading, with gains sparked by Kwasi Kwarteng’s decision to reverse a planned cut in the 45p rate of tax for high earners.
MORNING UPDATE – The FTSE100 closed very slightly up on Friday, gaining 0.18pc, while the FTSE 250 added 2.5%, after a turbulent week of trading. Over the weekend, sources suggested that Kwasi Kwarteng and Liz Truss would reverse a cut in the top 45p rate of tax – one of the most controversial elements in the ‘mini-budget’ which sparked turmoil last week.
On Friday, investors were boosted by a report which showed that the British economy grew 0.2% in the second quarter, as compared to a previous estimate of a 0.1% contraction. The economy is now expected to contract in the third quarter.
Sterling rose to $1.16 against the dollar in morning trading, having touched an all-time low point of just below $1.04 on Monday amid gloom sparked by the so-called ‘mini-budget’ on Monday.
British Prime Minister Liz Truss and Chancellor Kwasi Kwarteng met fiscal watchdog the Office for Budget Responsibility on Friday in a move widely seen as an attempt to placate markets.
The Office for Budget Responsibility – which was not consulted before Kwasi Kwarteng’s mini-budget last week – has confirmed it will give Kwarteng an initial forecast by 7 October, but the pound slumped again on news that this would not be published until November 23.
The Treasury said in a statement, “The Prime Minister and Chancellor reaffirmed their commitment to the independent OBR and made clear that they value its scrutiny.”
In the wake of the meeting, the Pound fell back by 0.6%.
Among the day’s biggest fallers was ship operator Carnival (GB:CCL) whose shares dropped 21.3% after forecasting a loss.
British business news today
Truss admits mistakes but sticks to controversial tax cuts plan (FT)
FCA chief warns banks need to restart the mortgage market (Times)
Bank of England monitors Credit Suisse amid market turbulence (Telegraph)
