European markets close higher as UK performs major U-turn on tax cuts; British pound soars (2023)

LONDON — European markets closed higher on Monday as traders digested a major fiscal U-turn in the U.K. that sent sterling and government bond prices higher.

European markets

Britain's new Finance Minister Jeremy Hunt opted to scrap most of the policies announced in Prime Minister Liz Truss's budget on Sept. 23, prompting gains in the pound. The U.K. currency was last seen up 2.1% at $1.1408, extending gains made ahead of the statement.

The pan-European Stoxx 600 provisionally ended 1.8% higher, with all sectors and major bourses in positive territory. Autos led the gains, up around 2.8% for the session.

Shares in the Asia-Pacific ended mixed on Monday as recession fears weighed on expectations of more monetary policy tightening around the world.

In the U.S., stock futures traded higher early Monday as investors awaited big earnings reports to roll in from Bank of America, whileGoldman Sachswill release numbers Tuesday.

Last week, a hotter-than-expectedinflation readingstoked wild price swings in the markets as investors readjusted their expectations for the U.S. Federal Reserve's forthcoming rate hikes.

Failed tax cut attempt will cause long-term damage to UK credibility, think tank says

European markets close higher as UK performs major U-turn on tax cuts; British pound soars (1)

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Long-term damage for the UK due to failed tax cuts, leading thinktank says

Squawk Box Europe

The U.K. government's attempt to introduce a swathe of tax cuts, which it today almost fully backtracked on after sparking chaos in markets, has caused long-term damage to the economy, according to a leading think tank.

"The markets were extremely unhappy about what the previous chancellor had announced, I think the government was pretty much forced into this scale of change," Paul Johnson, director of the Institute for Fiscal Studies, told CNBC's Arabile Gumede.

"There's undoubtedly a long-term damage [to the economy] because there's been more uncertainty created, there's lack of stability in policy. What you've seen the current chancellor do is try to reassert that certainty and credibility, but once that credibility is lost, it's very hard to regain. And the government is going all-out to regain it at the moment," Johnson said.

— Jenni Reid

(Video) UK U-turn | Bloomberg Surveillance 10/03/2022

Stocks on the move: Darktrace, JustEat top risers in buoyant market

Shares of U.K. cybersecurity firm Darktrace rose 13.5% in afternoon trading, as food delivery company JustEat gained 9.5%.

Across European stock markets, all sectors were in positive territory at 3:00 p.m. London time. The major German and French indexes were both up around 2.1%, while the U.K.'s FTSE 100 rose 1.3%.

— Jenni Reid

Truss tax cuts 'couldn't have come at a worse time': KPMG tax policy head

European markets close higher as UK performs major U-turn on tax cuts; British pound soars (2)

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Truss's scrapped tax cut plan couldn't have come at a worse time, says KPMG head of tax policy

Squawk Box Europe

The package of tax cuts announced by Liz Truss's government on Sept. 23, which was almost completely reversed this morning, was an experiment in trickle-down economics that couldn't have come at a worse time, according to KPMG's U.K. head of tax policy.

"It was just the way that it was done, the lack of clear costing, the fact that it was being done at a time when government finances are being stretched by the need to support consumers from energy [prices], and a time when global interest rates and gilt yields are rising," Tim Sarson told CNBC's "Squawk Box Europe."

— Jenni Reid

(Video) Pound plummets as UK government announces biggest tax cuts in 50 years

UK government bond yields drop during fiscal statement

The yields on long-dated U.K. government bonds, known as gilts, have fallen during a statement delivered by British Finance Minister Jeremy Hunt.

The yield on 20-year gilts was down 42 basis points during the statement, dropping to 4.439%. 30-year index-linked gilt yields were down also down 42 basis points to 4.368%.

10-year gilt yields fell 32 basis points to trade around 3.997% just before Hunt spoke. Yields on 5-year and 2-year gilts also slid Monday.

— Hannah Ward-Glenton

British Finance Minister Jeremy Hunt reverses majority of PM Liz Truss's budget

British Finance Minister Jeremy Hunt has reversed most of Prime Minister Liz Truss's mini-budget policies.

"Almost all" of the tax measures announced will be scrapped, according to Hunt. The energy price guarantee will remain intact until April.

— Hannah Ward-Glenton

Stocks on the move: ITV up 9.6%, Hargreaves Lansdown down 4.4%

Shares in ITV are up 9.6% following a report by the Financial Times that it may be selling a stake in its production arm ITV Studios.

ITV Studios is one of the largest program producers in Europe and some analysts estimate it could be worth more than its parent company's £2.5 billion ($2.82 billion) market capitalization.

British investment platform Hargreaves Lansdown is down 4.4% following slowed earnings reports and news that CEO Chris Hill is stepping down. The company reported assets under administration fell during the first quarter of fiscal 2023.

The organization has also been hit by a multimillion pound lawsuit over the failure of one of its former fund managers, Neil Woodford.

— Hannah Ward-Glenton

UK government bond yields drop ahead of fiscal statement

The yields on long-dated U.K. government bonds, known as gilts, have fallen ahead of a fiscal statement by the new Finance Minister Jeremy Hunt expected later today.

(Video) UK Government U-Turn On 45p Tax Rate & Week Ahead In Markets

10-year gilt yields fell 19 basis points to trade around 4.129%.

The yield on 20-year gilts was down around 15 basis points at market open, while 30-year index-linked gilt yields were down around 17 basis points.

Yields on 5-year and 2-year gilts also slid Monday.

— Hannah Ward-Glenton

British pound strengthens after policy reversals

Sterling rose on Monday morning in Asia following more policy reversals by the U.K. government late last week. The pound was last 0.56% higher at $1.1233.

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Prime Minister Liz Truss canceled another tax-cutting plan, fired her Finance Minister Kwasi Kwarteng and named Jeremy Hunt as successor.

Over the weekend, Hunt told BBC that he will show the markets that the U.K. "can properly account for every penny of our tax and spending plans."

— Abigail Ng

CNBC Pro: Nearing retirement? How to allocate your portfolio right now, according to the pros

Despite the volatility in markets, asset managers say it's important to remain invested if you're nearing retirement.

But how should one allocate funds, bearing in mind unsettled markets, a shorter investing horizon and the need for retirees to have some liquidity?

CNBC Pro asks the experts for their views.

Pro subscribers can read more here.

— Weizhen Tan

China's central bank leaves medium-term rates unchanged

The People's Bank of China rolled over its medium-term lending facility (MLF) loans and kept its interest rate unchanged at 2.75%, according to a statement on its website.

The central bank announced it would keep the one-year rate unchanged for a second month and injected 500 billion yuan ($70 billion) through the MLF.

A Reuters poll expected no change to the MLF rate and a partial rollover of loans from the central bank.

—Jihye Lee

(Video) Recession Fears | Bloomberg Surveillance 09/23/2022

CNBC Pro: As market volatility persists, Wall Street analysts say to sell these stocks

Stocks worldwide have taken a beating this year, and major indexes remain deep in negative territory.

As investors weigh whether to sell or stay invested, CNBC Pro screened almost 1,500 large and mid-cap global stocks and found a number of major companies with sell or underweight ratings.

CNBC Pro subscribers can read more here.

— Ganesh Rao

European markets: Here are the opening calls

European markets are set to open mixed on Thursday as political uncertainty continues in the region.

The U.K.'s FTSE index is expected to open 21 points lower at 7,348, Germany's DAX up 5 points at 14,239, France's CAC down 2 points at 6,605 and Italy's FTSE MIB up 40 points at 24,739, according to data from IG.

Global markets will be watching developments in Ukraine as the fallout from a missile hitting Polish territory continues. NATO said it was likely that Ukrainian air defenses were trying to intercept Russian missiles but Ukraine has said it wants to see evidence that its own forces were behind the strike that killed two Polish civilians.

In the U.K, Chancellor Jeremy Hunt will announce his latest fiscal statement on Thursday which is expected to contain billions of pounds' worth of spending cuts and tax hikes.

Earnings come from Vodafone and Virgin Money on Thursday. Data releases include European car registration data for October.

— Holly Ellyatt

CNBC Pro: Morgan Stanley's Mike Wilson flags a key risk to earnings — and names the stocks to avoid

Morgan Stanley's U.S. equity team, led by Michelle Weaver and Mike Wilson, says there's a key risk to earnings on the horizon.

(Video) 'Bloomberg Surveillance: Early Edition' Full (10/14/22)

The investment bank named several stocks it believes will be most impacted in the next 3-6 months, and which could see downside to their share prices in the same period.

Pro subscribers can read more here.

— Zavier Ong


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