Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown
‘’The two-week delay of plans to reveal detail of the UK government’s spending plans on Halloween hasn’t caused investors to take fright, with the markets cutting Prime Minister Rishi Sunak some slack, given that he’s just a day into the new job. The pound has remained above $1.15, retreating only a little from the mornings highs, but sterling is still up overall.
UK borrowing costs remain significantly lower with 10-year gilt yields hovering around 3.6%. Rishi Sunak’s new cast for the Cabinet, including the continuity Chancellor Jeremy Hunt, was aimed at demonstrating to the markets that financial stability is top priority for the government and for now it doing the trick. His choice of words in his maiden speech were also reassuring, with a promise to set limits on borrowing.
Early rewards have come with the sharp rise in the pound, back up to six-week highs earlier today, but sterling was also given a leg-up by a slightly weaker dollar, amid expectations that the Fed won’t go so hard and fast with rate rises with given the record slowdown in house prices.
Investors are mindful that it was the unnecessary rush to announce big tax cuts which caused such tumultuous times for the Truss administration and what they crave now is caution and stability. The premium slammed on UK assets by reckless policies of his predecessor appears to be slowly lifting, but hefty challenges for team Sunak remain, as the economy heads into recession and the productivity puzzle remains as cryptic as ever to solve.’’
