European Markets Jump 1.7%, UK Reverses Budget Proposals

Bridgette Randall
17 Oct, 2022
Frankfurt

European market indexes soared and bond yields declined after the UK finance minister reversed unfunded tax measures proposed in the mini-budget just a few weeks ago. 

The DAX index increased 1.7% or 211.22 to 12,649.03, the CAC-40 index advanced 1.8%or 108.73 to 6,040.66 and the FTSE 100 index added 0.9% or 60.18 to 6,920.25. 

The euro was nearly unchanged at 97.81 U.S. cents and the British pound increased 1.4% to $1.13. 

The yield on 10-year German bunds declined to 2.22%, French bonds fell to 2.82%, the British Gilts to 3.96%, Swiss bonds eased to 1.2% and Italian bonds to 4.64%. 

Brent crude edged up 84 cents to $92.45 and the TTF natural gas fell 8.1% to 130.34 euros a megawatt hour. 

 

UK Reverses Tax Proposals, gilt Yields Drop, Pound Rises  

The U.K. bond yields rose after the recently appointed finance minister Jeremy Hunt reversed all tax proposals released in the mini-budget ahead of parliamentary approval. 

The Pound rebounded and the Gilt yields dropped the most in decades after the government reversal but the longevity and credibility of the British government in doubt. 

The Liz Truss government is not likely to survive the remaining term ahead of the required general election in 2024. 

The yields fell 40 basis points for the 20-year and  the 30-year Gilts and the pound edged slightly higher but investors are concerned about how long the current government will survive. 

The growing political chaos and the Conservative Party infighting may force the UK general election earlier than the required date in early 2024. 

Europe Stock Movers 

Credit Suisse AG gained 2.6% to 4.53 Swiss francs and the troubled investment bank reached a financial settlement with the New Jersey State regulator related to residential mortgage securities dating back to 2008. 

ASOS Plc plunged 8.4% to 485 pence after the U.K.-based online fashion retailer confirmed that the company is in negotiations with lenders in revising credit facility terms.   

Energy complex companies rose after crude oil prices rose more than 1% and the dollar edged down. 

BP Plc, Eni SpA, Repsol SA, TotalEnergies SE and Shell Plc increased between 1% and 2.5%. 

Hargreaves Lansdown plunged as much as 8% before recovering to close down 3.5% to 787.95 pence and the investment platform is facing multi-million pound lawsuits from thousands of investors over the fallen equity income fund managed by Neil Woodford. 

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