European stocks close 2.3% lower as UK tax cuts and weak eurozone data disrupt markets
The pound sterling fell 2.8% against the dollar
The pound continued to fall on Friday afternoon, losing up to 2.8% against the dollar.
It was trading at $1.0941 as of 3:45 p.m. London, as analysts said the prospect of hitting parity in the dollar was certainly on the table.
Investors appear to have been ‘scared off’ by the UK government’s massive tax cut package at a time of much higher spending on an energy price support package and higher interest rates .
German short-term bond yields at 14-year high
The two-year yield on German government bonds hit 2.0009%, its highest level since December 2008.
This followed a decline in the Eurozone Purchasing Managers’ Index, which led to renewed recession warnings, and the announcement of a UK tax cut package, which triggered a massive sale of UK government bonds.
The yield on German 10-year bonds exceeded 2% for the first time since December 2011.
Last month, German bonds suffered their worst month since 1981 amid high inflation and volatility in energy and equity markets.
Italian election: A probable victory for the far right?
Italian voters will elect the country’s next prime minister on Sunday, with polls suggesting a shift to the right.
The snap election will likely mark the country’s biggest political shift in decades as the country continues to struggle with economic instability.
Read CNBC’s full election preview here.
Sterling hits 37-year low at $1.11
The pound hit a new 37-year low against the dollar at $1.11, down 1.41%, following an economic announcement from UK Finance Minister Kwasi Kwarteng.
UK stocks fall, pound rises on new economic plan
UK drops plans to raise corporate tax
UK Finance Minister Kwasi Kwarteng has confirmed that the UK government will not raise corporation tax to 25% as planned.
The rate will remain at 19% in an attempt to revive economic growth.
UK government announces $67 billion energy package and tax cuts
Britain’s finance minister has announced a series of measures to help tackle the rising cost of living and boost the country’s economy, including a £60 billion ($67 billion) energy package .
The package will subsidize household and business gas and electricity bills for the next six months.
The government also announced tax cuts for businesses in designated sites, financial services reforms and the removal of banker bonus caps.
Eurozone likely to enter recession as rising prices hit demand
The euro zone will likely slip into recession as the slowdown in business activity in the region deepened this month, according to S&P Global.
S&P Global’s Purchasing Managers’ Index (PMI) fell to 48.2 in September from 48.9 in August.
High energy costs hit manufacturers hard after Russia invaded Ukraine, and soaring prices contributed to deteriorating business conditions.
September is the third month in a row that the PMI has fallen below 50, the benchmark separating growth and contraction.
FTSE muted ahead of UK mini-budget
The UK’s FTSE 100 is fairly flat this morning as investors await a mini-budget from the country’s finance minister, Kwasi Kwarteng.
The measures set out in the budget announcement are expected to spur the slowdown in the UK economy.
Tax cuts, energy subsidies and planning reforms are expected to make up the £200bn ($225bn) package.
HSBC warns investors to avoid European stocks
Investors should avoid investing in Europe in the hunt for value stocks as the continent’s energy crisis means the risk-reward ratio is still not there, according to Willem Sels, global CIO at HSBC Private Banking and Wealth Management .
“I would caution against buying Europe due to lower valuations and interest rate movements,” said Willem Sels of HSBC Private Banking.
Learn more here.
Here’s how the pan-European Stoxx 600 has traded year-to-date:
Credit Suisse shares hit rock bottom
Credit Suisse leads the early morning market slowdown after a report on a possible capital raise.
Shares of the investment bank hit a record low of 4.335 francs in early trading.
European markets: here are the opening calls
European stocks are expected to open in positive territory on Friday as investors react to central bank rate hikes and signals of recession in the United States.
Britain’s FTSE 100 index is set to open around 25 points higher at 7,172, Germany’s DAX is set to rise 38 points to 12,581, France’s CAC 40 is set to rise 13 points and Italy’s FTSE MIB is set to rise 42 points, according to GI data.
CNBC Pro: Is it Time to Buy Treasuries? Here’s how to allocate your portfolio, according to the pros
CNBC Pro: Support hedge funds to outperform stocks and bonds this year, UBS says
As stock and bond prices fall simultaneously, hedge funds have largely outperformed and are “well positioned to weather the current market volatility”, according to a new report from UBS.
As market volatility persists, the Swiss bank shared the types of hedge funds it prefers.
Pro subscribers can learn more here.
Nomura lowers China’s growth outlook for 2023
Nomura lowered its forecast for China’s annual growth in 2023 to 4.3% from 5.1%.
Analysts cited a potentially prolonged Covid-zero policy or a spike in infections in the country after a possible reopening in March.
The latest downgrade comes after Goldman Sachs lowered its outlook earlier this week to 4.5% from 5.3%.
William Ma of Grow Investment Group told CNBC’s “Street Signs Asia” that he was optimistic about the policy changes he sees coming after the People’s Party Congress in mid-October.
Futures start flat in post-trade
Stock futures were flat after another tumultuous day as investors continue to grapple with the Federal Reserve’s decision to raise rates and worries about the health of the economy.
Dow Jones Futures rose 41 points, or 0.14%, to 30,190. The S&P 500 rose 4 points, or 0.11%, to 3,776. The Nasdaq 100 rose 10 points , 0.09%, to 11,575.50.