- The big news came in from the UK yesterday, when the Bank of England (BoE) announced a delay in their quantitative tightening program, instead they will be buying longer term gilts that are linked most closely to workers’ pensions and home loans, in light of a sharp spike in UK bond yields that threatened to upend the bond & the currency markets. The move calmed investors and there was a recovery in UK gilts, and by extension in European bonds as well.
- Global stocks also picked up cues from this positive mood and staged a smart recovery. While the FTSE 100 ended the day with a small recovery of 0.2%, it was the US stocks that saw the strongest recovery, with S&P ending the day up by 1.97%, while Nasdaq & Dow were up by 2.05% & 1.88% respectively.
- The move from BoE was driven by the run on British assets ever since the government under new PM Truss came out with a mini-budget last week, with plans to reduce taxes at a time when UK was already grappling with record inflation. This news threw British assets to the wolves, with 30Y bond yields crossing 5%, up from 3.5% a week back. The Pound is also down by around 5% vs the dollar in the past week.
- Oil prices are on the rise since yesterday about 4% due to supply disruptions in the Gulf of Mexico due to a hurricane. The market is keenly awaiting the OPEC meeting next week, which could see further production cuts by the cartel. This move could see some upward pressure on oil prices which are at annual lows. Brent oil futures in London today trading at $88.1/barrel, while the US WTI futures are at $82.2 a barrel.
