Market volatiltiy continues as Kwarteng gets the push

Markets turn lower as we head towards the weekend, with Liz Truss budget reversal seeing economic uncertainty traded for political instability.

UK political turmoil provides a fourth chancellor of 2022

“Kwasi Kwarteng has been ousted from No 11 just three-weeks on from the fateful mini-budget that was ultimately responsible for his demise. Liz Truss remains in charge for now, but there are rumours that her decision to reverse the corporation tax cut will do little to help her stay in the post much longer than Kwarteng. For traders, today has provided yet another bout of unpredictable volatility, with the risk-on momentum driven by falling yields reversing as political turmoil takes hold once again. Unfortunately for Truss, her swift ability to spook markets with a swathe of unfunded spending plans is now being followed by yet another rise in yields as markets wonder whether we could soon see another push to replace her.”

Tale of two halves as morning rally starts to turn

“Market volatility has continued apace today, with yesterday’s post-CPI rebound proving fleeting if this afternoon’s turnaround is anything to go by. Traders are keeping a close eye on yields, with the recent pullback providing the basis for a risk-on market move. However, with core inflation at a 40-year high, another 75bp hike in November, and a raft of declining earnings figures expected over the course of the coming month, it is easy to see why traders remain largely pessimistic. Today has seen the big banks provide an insight into exactly how the industry fares when rising interest rates meet crumbling consumer sentiment. The improved margins afforded by rising rates have helped drive a beat on both bottom and top line growth for JP Morgan. However, risks lie ahead for the banks, with growing expectations that we will see lending, M&A, and housing come under pressure as rates rise.“