The spread of speculation that the British government may reconsider its controversial fiscal policies has triggered gains in European markets.
While the Stoxx 600 rose 1.3% earlier in the day, the utilities sector was down 2.7%. Likewise, all sectors and major stock exchanges rose. Many ministers attended the annual meeting of the International Monetary Fund (IMF) in Washington. One of the main topics discussed at the conference was economic chaos.
Meanwhile, it was reported Thursday that the British government may eliminate some costs in the mini-budget. British Finance Minister Kwasi Kwarteng presented the mini-budget on September 23. The budget aims to reduce energy bills and taxes, which would benefit both households and businesses. This could lead to positive changes in European markets and a resumption of economic growth. In presenting the mini-budget to parliament, the finance minister called for a “new economy”.new approach or a new era, focused on growth“. He added that there is a need to reform the supply side of the economy. Kwasi Kwarteng noted that high taxes are hurting Britain’s competitiveness. The minister further explained the impact of high taxes in Britain:
“They reduce the incentive to work, to invest and to start a business, and the higher the taxes, the more people seek to avoid them, to go elsewhere or simply to work less…rather than spend their time and money on more creative and productive purposes.
European markets jump on hopes of UK tax reversal
Now that reports suggest a possible removal of the $48.6 billion in unfunded tax cuts, stocks and the pound have risen considerably. European markets are recovering somewhat and the Dow Jones also closed up 800 points.
Despite the terrifying inflation report, the Asia-Pacific market advanced overnight as investors focused on the potential reexamination of fiscal policies. In addition, hopes are high that the Chinese government will take more stimulus measures.
With the announcement of a press conference by Prime Minister Liz Truss this afternoon at 2:00 PM, UK bond yields fell. Gilts, the British government bonds, jumped to a session high on the conference announcement. Similarly, the 30-year yield jumped 4.261%. In response to questions about a possible U-turn on the mini-budget, the finance minister said he was “totally confused about the realization of the growth plan.“
Prime Minister Truss is under intense pressure to revise certain policies. In addition, opinion polls show that his government lacks support. After the announcement of the mini-budget, the pound hit an all-time low. The British currency lost 5 per cent against the dollar, reaching $1.03.