Marketmind: In Hunt we Truss

[October 17, 2022]  A look at the day ahead in European and global markets from Ankur Banerjee

It didn't take long for Britain's newest finance minister Jeremy Hunt (that's four finance ministers in four months for those keeping track) to poke holes in Prime Minister Liz Truss's fiscal plans.

While insisting Truss, who is fighting to keep her job, is indeed in charge, Hunt catalogued the mistakes made in the past few weeks and signalled that tighter spending controls and some tax rises are on the way.

"I think what the country wants now is stability."

Monday will test all sides in the UK gilt markets now that the central bank's emergency bond-buying programme has concluded.

Hunt has already spoken to the Bank of England Governor Andrew Bailey, agreeing on the need to repair the public finances.

Sterling has nudged higher after Truss reversed some of her government's economic plan, not long after she sacked Kwasi Kwarteng as finance minister. Bond investors, however, remained sceptical of the latest U-turn.

Meanwhile, China and Hong Kong stocks fell after Chinese President Xi Jinping quashed hopes of any changes in growth-hitting zero-COVID policies and property sector curbs in a speech on Sunday.

China's major state-owned banks were spotted swapping yuan for U.S. dollars in the forwards market and selling those dollars in the spot market, banking sources told Reuters on Monday.

New Chancellor of the Exchequer Jeremy Hunt leaves 10 Downing Street in London, Britain, October 14, 2022. REUTERS/Henry Nicholls

On the corporate front, the Wall Street Journal reported that Goldman Sachs will combine its investment banking and trading businesses into one unit as part of a major overhaul.

Elsewhere, the yen languished near a 32-year low as markets awaited signs of intervention from Japanese authorities. Over in Washington, Bank of Japan Deputy Governor Masazumi Wakatabe said the yen's recent fluctuations were "clearly too rapid and too one-sided," while the country's authorities kept up their warnings to the market of a firm response to overly rapid declines.

Key developments that could influence markets on Monday:

Economic events: CPI data from Italy

Speakers: ECB's Luis de Guindos and Philip Lane to speak at different events

(Reporting by Ankur Banerjee; Editing by Wayne Cole and Jacqueline Wong)

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