UK markets open in 6 hours 55 minutes
  • NIKKEI 225

    27,711.52
    -174.35 (-0.63%)
     
  • HANG SENG

    19,441.18
    -77.11 (-0.40%)
     
  • CRUDE OIL

    74.59
    +0.34 (+0.46%)
     
  • GOLD FUTURES

    1,781.40
    -1.00 (-0.06%)
     
  • DOW

    33,596.34
    -350.76 (-1.03%)
     
  • BTC-GBP

    14,074.45
    -44.12 (-0.31%)
     
  • CMC Crypto 200

    403.29
    +1.48 (+0.37%)
     
  • ^IXIC

    11,014.89
    -225.05 (-2.00%)
     
  • ^FTAS

    4,114.48
    -28.73 (-0.69%)
     

Banks urge Kwarteng to take action now with November Budget ‘way too far away’

Chancellor Kwasi Kwarteng banks tax cuts Budget Bank of England bond inflation - Simon Walker / HM Treasury
Chancellor Kwasi Kwarteng banks tax cuts Budget Bank of England bond inflation - Simon Walker / HM Treasury

Banks have urged Kwasi Kwarteng to outline his plans to boost economic growth before November, warning the next Budget was “way too far away”.

The Chancellor met bosses at major Wall Street banks this morning as he tried to reassure investors amid market turmoil in the wake of his tax-cutting mini-Budget last week.

Mr Kwarteng doubled down on his fiscal plan and said he will unveil more details about an overhaul of City rules to boost growth in late November.

But the bank bosses complained this was “way too far away”, telling the Chancellor he needed to “communicate frequently, and overcommunicate, if necessary”, a source told the Telegraph.

Mr Kwarteng did not indicate that he might bring forward the timetable for new fiscal rules.

It came as warnings of an imminent crisis in the UK pension market forced the Bank of England into a shock £65bn intervention in bond markets today.

The Bank has been warned by investment banks and fund managers in recent days that the sharp fall in bond prices has forced pension funds to sell bonds to meet margin calls.

In turn, this forces prices down more in a self-reinforcing market spiral. Officials were warned a crash could take place as soon as today.

Bank of England Governor Andrew Bailey hopes to break the cycle by buying up bonds in an effort to halt the market fall.

06:20 PM

Wrapping up

That's all from us, thank you for following! Before you go, check out the latest stories from our reporters:

05:59 PM

Clamp-down on tech sector has relied on out-of-date tools for regulator, CMA director says

The CMA
The CMA

Enforcing rules on tech companies has taken too long and relies on out-of-date principles, a senior CMA director has said.

Will Hayter told the Bloomberg Technology Summit that tools to clamp down on the sector on “were all set up before digital was a thing.”

The CMA senior director said enforcement had been “backward-looking” and “narrowly targeted to a specific issue".

“What’s needed is a bit of a shift to be able to set some of the rules up front in a frankly more collaborative way with the companies concerned than can really work in our enforcement framework,” Hayter said.

05:37 PM

EDF exploring keeping UK nuclear power plants open for longer to boost energy supplies

EDF is exploring keeping two of its UK nuclear power stations open for longer than planned amid growing concern over energy shortages, Rachel Millard writes.

The French state-owned company said it will review its current plans to close Hartlepool and Heysham 1 in March 2024 “with an ambition to generate longer if possible”. 

The UK’s nuclear fleet, owned by EDF and minority partner Centrica, currently supplies about 16pc of Britain’s power annually. However all but one of the stations, Sizewell B in Suffolk, are set to retire by the end of the decade, with only one new plant being built.   

The closures will unfold just as demand for clean electricity rises due to a boom in electric cars, while stable sources of power are needed to balance out intermittent renewables.

Read the full article here. 

05:16 PM

Treasury official defends economic plan amid pressure to reverse policies

The financial secretary to the Treasury Andrew Griffith has been speaking to Sky News this afternoon, arguing that the government fiscal plans are the "right plans" even as the IMF last night called for Liz Truss to stage a U-Turn.

He said the Government would not be taking responsibility for the market turmoil since Kwasi Kwarteng laid out his plans late last week.

"We are seeing the same impact of Putin's war in Ukraine cascading through things like the cost of energy, some of the supply side implications of that, and that's impacting every major economy and just to save every major economy, you're seeing interest rates going up as well.

"Every major economy is dealing with exactly the same issues... What we've seen today is the Bank of England do their job."

05:02 PM

Rail strikes this weekend to hammer bars and nightclubs

Industrial action -  James D. Morgan
Industrial action - James D. Morgan

Britain may still be reeling from the fall-out from last week's mini-Budget, but bar and nightclub bosses are warning further pain is coming this weekend, as rail strikes are set to slash footfall.

Michael Kill, chief executive of the Night Time Industries Association, said the strikes, which are taking place on October 1, 5 and 8, come after "an extremely unnerving few weeks for our sector, costs escalating and a budget which has done little to dispel concerns".

Around 40,000 workers are set to walk out this Saturday amid a long-running row with train operators over pay and working conditions, with four unions coordinating to strike on the same day.

"We are now faced with further strike action over the weekend where only 11pc of trains services will be operational, and a notice to suggest people only travel when absolutely necessary.

"Our industry is in survival mode, and cannot afford to lose a day of trade let alone a weekend, we are relying on everydays trade to cover our costs and get through winter."

04:53 PM

Reaction: 'We're a long way from 1976'

American economist Paul Krugman has weighed in to the debate over what the global impact will be from the UK market crisis.

04:33 PM

Boohoo turmoil was a 'phase', boss insists

Boohoo also owns PrettyLittleThing - James Akena/Reuters
Boohoo also owns PrettyLittleThing - James Akena/Reuters

Meanwhile, in corporate news today, Boohoo’s chief executive has insisted that the turmoil at the fast-fashion company was simply a “phase” despite sounding the alarm on sales and profits.

As Laura Onita reports, the online retailer, which also owns PrettyLittleThing, has revealed it plunged to a £15.2m per-tax loss in the six months to Aug 31, compared with a £24.6m profit last year.

Sales fell by 10pc to £882m during the period as young shoppers cut back on spending. It now expects annual revenues to fall by a tenth, compared to earlier expectations they would grow by about 2pc. 

Boohoo blamed the performance on a significant increase in returns, supply chain woes and the recent deterioration in the economy and consumer confidence. 

Shares in the company slumped to their lowest level since 2016 following the sales warning, but later recovered to trade up 8pc in the afternoon. 

Chief executive John Lyttle said he was “very confident about the long-term outlook” despite the recent poor performance.

Boohoo is the most shorted stock on the London market. Disclosed short positions in the online fashion retailer reached an all-time high of 9.95pc last week, according to data from ShortTracker.

The stock has lost 42pc of its value since its debut on the London stock market eight years ago, with the company now worth £500m versus its June 2020 high of more than £5bn.

04:16 PM

BoE under pressure for major interest rate rise

Pressure is mounting on the Bank of England to increase interest rates, as the markets continue to be rocked in the wake of Kwasi Kwarteng's mini-Budget.

Earlier today, the BoE made a shock £65bn intervention in bond markets, in an attempt to ward off a crisis in the UK pension markets.

Deustche Bank’s global head of foreign-exchange research George Saravelos said it would now need to think about raising rates above 6pc to stabilise the pound. They currently stand at 2.25pc.

“If this isn’t delivered, it risks further currency weakening, further imported inflation, and further tightening, a vicious cycle,” he said.

04:05 PM

Handing over

That's all from me – thanks for following on another tumultuous day on the markets. Hannah Boland will take the reins from here.

03:58 PM

Pound wipes out losses

Sterling looks set to end the day in positive territory after turmoil in bond markets sparked a wild ride for the currency.

The pound initially spiked after the Bank of England stepped in buy up bonds, before tanking as much as 1.5pc against the dollar.

It's since reversed those losses to edge 0.2pc higher at $1.0751.

03:53 PM

US shoppers get Rolex discounts thanks to collapsing pound

Rolex US discount pound dollar - Geography Photos/UIG via Getty Images
Rolex US discount pound dollar - Geography Photos/UIG via Getty Images

We might be in crisis, but it's a different story for US bargain hunters visiting the UK.

They can snap up Rolexes and other luxury watches at discounts of as much as 19pc thanks to the crash in the value of the pound.

What's more, policy changes outlined in the mini-Budget including a tax cut for tourists means the discount could be boosted as high as 32pc, according to watch retail magazine WatchPro.

With the pound at record lows against the dollar, a steel Rolex GMT-Master II that sells for $11,289 (£10,507) in the US can be bought for a mere $9,293 in the UK with dollars – a discount of 18pc.

A 41mm diameter Datejust model can be bought for $7,088 – 19pc below US prices.

Every cloud...

03:38 PM

There's 'tremendous opportunity' in UK banks, says JP Morgan boss

A top JP Morgan executive has said there are huge investment opportunities in UK banks even amid all the market turmoil.

Mary Callahan Erdoes, head of asset and wealth management at the bank, said that staying out of Britain entirely would be a mistake.

Speaking at a conference in New York, she said: "UK banks might be one of the most interesting things you can invest in. You can find tremendous opportunity."

The bank boss said that amid the turmoil and a collapse in the pound, JP Morgan was finding real estate lending opportunities as well.

03:24 PM

How the Bank of England is scrambling to stabilise markets

Pound sterling Bank of England bonds - Daniel LEAL / AFP
Pound sterling Bank of England bonds - Daniel LEAL / AFP

The Bank of England performed a dramatic U-turn this morning, putting the brakes on its plan to sell Government bonds and launching a new scheme to buy gilts instead.

Officials on the Financial Policy Committee, led by Andrew Bailey, the Governor, are seeking to push down the Government’s borrowing costs after a sharp spike in interest rate predictions in financial markets.

Interest rates are rising across the world, but investors were spooked by Kwasi Kwarteng’s mini-budget last week which set out plans for significant tax cuts on top of the unlimited cost of the energy support package, indicating a steep rise in borrowing is on the way.

But what has the Bank done and how will it help? Tim Wallace explains.

​Read his full story here

03:10 PM

Markets are functioning well, says Janet Yellen

Time to go across the pond for a more sanguine take on what's going on.

Janet Yellen, US Treasury Secretary, has insisted that financial markets are functioning well, despite a tumble in stocks and bonds and a surge in the dollar that's unsettled investors.

She told reporters: “We haven’t seen liquidity problems develop in markets – we’re not seeing, to the best of my knowledge, the kind of deleveraging that could signify some financial stability risks.

“With the United States moving faster than many other countries, we’re seeing upward pressure on the dollar and downward pressure on many other foreign currencies.

“To me, these kinds of developments – which represent a tightening of financial conditions – are part of what’s involved in addressing inflation.”

The US Treasury chief added: “I think markets are functioning well”, but declined to comment specifically on UK economic policies.

02:56 PM

Martin Sorrell: Sunak was adult in the room

Martin Sorrell Budget Kwasi Kwarteng - Hollie Adams/Bloomberg
Martin Sorrell Budget Kwasi Kwarteng - Hollie Adams/Bloomberg

Michael O'Leary isn't alone in criticising the Government, however.

Sir Martin Sorrell, chairman of S4 Capital, said Conservative members had made a mistake by electing Liz Truss as Prime Minister instead of former Chancellor Rishi Sunak.

The ad boss told Bloomberg: "Sunak was the adult in the room and forecast all this. It's like a CEO and CFO reducing revenues and increasing costs without a plan.

"In this case, the shareholders will vote in two years, unfortunately."

Meanwhile, former BT chairman Mike Rake said there was "grave concern that this policy is in danger of further damaging our reputation and our economy".

02:45 PM

Michael O'Leary brands UK tax plans 'nuts'

Ryanair Michael O'Leary - REUTERS/Bernadett Szabo
Ryanair Michael O'Leary - REUTERS/Bernadett Szabo

Michael O’Leary has weighed in on Kwasi Kwarteng's tax-cutting plans in typically outspoken fashion.

He described the fiscal plan as “nuts”, adding that the mini-Budget could potentially bankrupt the UK economy in the coming years.

Speaking in Dublin, Mr O’Leary said: “I think what they have done in the UK is nuts. You can’t have an energy guarantee that runs for two years. It’s completely uncosted.

“I think they could bankrupt the UK economy in the next two years. We [Ireland] have been there with the bank guarantee back in 2007 and 2008, we can’t go back there again.”

02:36 PM

Wall Street rises on lower bond yields

Wall Street has opened higher as easing US bond yields and Bank of England's intervention helped bring some calm to markets.

Falling Treasury yields provided a boost to rate-sensitive tech stocks, though gains were capped by losses for Apple after it dropped plans to boost iPhone production.

The benchmark S&P 500 and Dow Jones rose 0.1pc and 0.2pc respectively. The tech-heavy Nasdaq slipped 0.1pc.

02:21 PM

Pensions Regulator welcomes BoE's bond-buying

The Pensions Regulator has welcomed the Bank of England's intervention in bond markets and said it's monitoring the situation closely.

The Bank was forced to step in following warnings of an imminent crisis in UK pensions.

TPR said:

We are monitoring the situation in the financial markets closely to assess the impact on DB [defined benefit] pension scheme funding.

We welcome steps announced by the Bank of England to restore orderly conditions through temporary purchases of long-dated UK government bonds.

We again call on trustees of DB schemes and their advisers to continue to review the resilience and liquidity of their investments, risk management and funding arrangements, and plan accordingly to protect the interest of scheme members.

02:16 PM

Reaction: 'Worst unforced policy error of my lifetime'

Torsten Bell at the Resolution Foundation doesn't mince his words when it comes to the Government's handling of the economy...

02:11 PM

Mortgages set to rise further amid market turmoil

Mortgage interest rates banks - ANDY RAIN/EPA-EFE/Shutterstock
Mortgage interest rates banks - ANDY RAIN/EPA-EFE/Shutterstock

Mortgage prices look set to rise further, costing borrowers hundreds of pounds extra every month.

The yield on two-year interest rate swaps, which lenders typically use to price mortgage products, reached nearly 6pc this week and is at its highest level since the 2008 financial crisis.

Two-year mortgage costs are still lagging behind at between 3pc and 5pc.

The dramatic rise in swaps rates suggests banks will have to ramp up the cost of new mortgages in the coming weeks.

A string of banks including HSBC, Santander and Halifax have pulled mortgage offers from the market in the last few days in response to the increasing uncertainty.

01:49 PM

More reaction: BoE's move 'only a sticking plaster'

Bethany Payne at Janus Henderson says the Bank of England blinked first in its stand-off with the Government.

The Mexican standoff between the government on the fiscal accelerator, and the central bank on the monetary brake, was won by the Government as the Bank of England has had to blink.

The contagion risks of margin calls, caused by higher gilt yields, meant that a reflexive negative feedback loop into falling UK asset prices had become too high, risking a doom loop.

The central bank will be concerned over its appearance as being independent, and has therefore tried to walk a tightrope between today’s announcement of ‘limited period’ of long-dated gilt purchases before starting a delayed quantitative tightening schedule.

This schedule will be at a slightly higher pace so that they still make good on their promise to reduce their balance sheet by £80bn in the first year. The likelihood of the market misunderstanding this policy change though is high, and risks a potential hazardous misstep.

Today’s announcement will stem some of the tide of selling flows we were expecting this week, but is only a sticking plaster to a much wider problem.

The IMF warned the UK government overnight to ‘re-evaluate’ tax cuts, but did the Bank of England just give them the green light to continue with their plans? Certainly, the market would have benefitted more from the Government blinking first, not the other way around.

01:40 PM

Reaction: Long-term bonds vulnerable

Orla Garvey at Federated Hermes Limited says the bond market remains vulnerable despite today's intervention.

The Bank of England has surprised markets today by announcing that it will conduct temporary purchases of long-dated gilts with the purpose of stabilising market conditions.

While the sell-off in long-dated gilts and particularly in inflation-linked gilts has been extreme, this emergency action does beg the question about what was happening behind the scenes to warrant such a move.

This probably reduces the tail risk of endless stop-outs causing real yields to continue spiralling higher. But starting quantitative tightening while maintaining quantitative easing will cause confusion around tightening rates.

It also doesn’t change that fact there is a huge amount of issuance coming in the years to come, and the Bank of England won't be here to buy it.

The primary concern is that markets see this as something to be tested, and I don’t believe the bank will want to set this precedent. Overall, the measures will continue to leave long-dated gilts vulnerable.

01:27 PM

BoE to spend up to £5bn on gilts per auction

The Bank of England has released a few more details about its bond-buying programme.

The gilt purchases will initially be worth up to £5bn per auction, with the first to be carried out between 3pm and 3.30pm today.

The central bank said it's ready to purchase conventional gilts with a residual maturity of more than 20 years in the secondary market.

The Bank added the parameters of the programme will be kept under review.

01:06 PM

IFS: Don't dismiss economic orthodoxy

Paul Johnson at the IFS has hit back at comments from some Tories who have dismissed the IMF's beliefs as economic "orthodoxy".

He acknowledges it needs to be tested, but says simply dismissing it is dangerous.

12:47 PM

Chart: Pound takes another plunge

12:40 PM

Turmoil rattles global markets

Global markets interest rates economy -  FRANCK ROBICHON/EPA-EFE/Shutterstock
Global markets interest rates economy - FRANCK ROBICHON/EPA-EFE/Shutterstock

While it's a particularly turbulent day in the UK, it's worth pointing out that there's turmoil across global markets at the moment.

Tom Rees rounds it up:

Stocks in Europe have slumped to their lowest level since 2020 and government borrowing costs around the world have risen sharply, as mounting recession fears and another spike in tensions between Russia and the West sparked a sell-off on global markets.

The Chinese yuan hit a record low versus the surging dollar and government borrowing costs in the US, UK and eurozone reached their highest levels in more than a decade in the latest bout of market turbulence.

Huge price moves on Wednesday forced the Bank of England to step in and address the "dysfunctional" gilts market, buying Government debt in an attempt to bring down borrowing costs.

Stocks and bonds have endured heavy losses in recent weeks as worries grow over the economic impact of aggressive central bank action to tame inflation.

Investor sentiment has also been dented this week by huge leaks in the Nord Stream 1 and 2 gas pipelines from Russia, which European leaders have blamed on sabotage.

As gloom descended again on global markets on Wednesday, the Stoxx 600 Europe – which tracks the biggest stocks in the region including the UK – slipped 1.7pc to the lowest since late 2020 after a drop on Wall Street and in Asia overnight. It is the fifth straight day of declines.

Read Tom's full story here

12:28 PM

Chart: Wild ride for bond yields

12:19 PM

Bond yields start rising again

Meanwhile, it's a wild for bonds as well.

The yield on 30-year gilts had tumbled as low as 4.3pc – on track for its largest drop in data going back to 1996. But it's now back on the rise at just under 4.5pc.

It's the same story for the 10-year yield, which is up from its low of just over 4pc to 4.3pc.

12:12 PM

Pound tumbles 1.5pc

After an initial spike following the Bank of England's announcement, sterling is now firmly on the back foot.

The pound tumbled as much as 1.5pc against the dollar to as low as $1.05. That's back towards the all-time low it plumbed at the beginning of the week.

12:08 PM

Markets still betting on big interest rate rises

Despite the Bank's big intervention today, markets are still betting it will have to raise interest rates sharply.

Bond yields have fallen back sharply – a welcome relief for UK borrowing costs – but the same can't be said about rate rise expectations.

Traders are betting on 1.5 percentage points of interest rate rises before the Bank's next scheduled meeting in November and think rates will peak above 6pc in 2023.

12:04 PM

Capital Economics: 2.5pc growth plan looks even more unachievable

Paul Dales, chief UK economist at Capital Economics, casts further doubt on Kwasi Kwarteng's Budget plans.

The continued fallout this morning from the Chancellor’s mini-Budget has forced the Bank of England to step in to avoid the early stages of a financial crisis.

It has postponed its plan to sell some gilts and pledged to buy as many long-term gilts as needed. Long-term gilts yields are already falling back.

But the overall sense is that the downside risks to the UK economy are growing.

The fact that it needed to be done in the first place shows that the UK markets are in a perilous position. It wouldn’t be a huge surprise if another problem in the financial markets popped up before long.

Either way, the downside risks to economic growth are growing. And the Chancellor’s 2.5pc real GDP growth target is looking even more unachievable.

11:55 AM

Reaction: Budget uncertainty remains the biggest issue

Costas Milas, professor of finance at the University of Liverpool, emails in with his take on today's developments:

It is fair to say that the International Monetary Fund's economic assessment has historically been questionable. In fact, an IMF recent report concluded that its medium-term forecasts "paint" a much better economic picture than what happens in practice.

Therefore, critics of the IMF will argue that the IMF should not give lessons to the UK government on how to run its economy.

However, the stark reality is the following: The new Chancellor’s unfunded tax cuts, presented in the mini-Budget without proper economic costings, have fuelled economic policy uncertainty which, in turn, has raised financial uncertainty.

In other words, a looming recession might turn out even deeper than currently predicted.

The Bank of England's announcement of intervening in financial markets to lower UK government bond yields is an attempt to tackle the negative impact of financial uncertainty on the UK economy.

The problem, of course, remains economic policy uncertainty triggered largely by the mini-Budget. 

11:51 AM

Reaction: BoE wrongfoots markets

Jens Nærvig Pedersen at Danske Research points out that the market failed to see this one coming...

11:48 AM

FTSE recovers as bond yields plunge

The FTSE 100 has clawed back most of its heavy losses from earlier in the session after the Bank of England stepped into bond markets.

Stocks sensitive to bond yields were the biggest gainers as yields tumbled on plans to start buying up long-term bonds.

British LandBerkeley, Segro and Land Securities were among the biggest risers, all up around 3pc as real estate companies welcomed the news.

Asset managers including Abrdn and utilities such as SSE and National Grid were also big winners.

The FTSE 100, which had tumbled as much as 2pc earlier this morning, pared losses to 0.3pc. The FTSE 250 was down 0.5pc.

11:40 AM

Bond yields poised for record plunge

Long-term UK bonds are headed for their biggest ever rally after the Bank of England said it will start buying bonds and delay its quantitative tightening programme.

The yield on 30-year gilts plummeted as much as 65 basis points to 4.34pc – the largest drop in data going back to 1996.

That wiped out an earlier decline this morning and comes after days of heavy selling amid concerns about the Government's spending plans.

11:32 AM

More reaction: BoE is floundering

Markets analyst Neil Wilson is also less than impressed...

11:31 AM

Reaction: This isn't stable equilibrium

FX analyst Viraj Patel is damning about what's unfolding in UK markets right now.

He says the Bank of England is now in a game with markets, adding: "This is not a stable equilibrium."

11:28 AM

Pound spikes - then falls again

Sterling has been on a wild ride following the Bank's announcement.

The pound initially surged by 1pc against the dollar to over $1.08. But it was unable to hold onto its gains.

That's perhaps a worrying sign for the Bank that its intervention is failing to convince markets.

11:25 AM

Treasury: We support Bank's stability plans

The Treasury has issued a response to the intervention, saying it's committed to the Bank's independence and will support its financial stability and inflation objectives:

The Bank of England, in line with its financial stability objective, carefully monitors financial markets and any potential risk to the flow of credit to the real economy, and subsequent effects on UK households and businesses.

Global financial markets have seen significant volatility in recent days. The Bank has identified a risk from recent dysfunction in gilt markets, so the Bank will temporarily carry out purchases of long-dated UK government bonds from today in order to restore orderly market conditions.

These purchases will be strictly time limited, and completed in the next two weeks. To enable the Bank to conduct this financial stability intervention, this operation has been fully indemnified by HM Treasury.

The Chancellor is committed to the Bank of England’s independence. The Government will continue to work closely with the Bank in support of its financial stability and inflation objectives.

11:21 AM

UK bonds surge after BoE intervention

UK bonds have surged after the Bank of England said it will intervene in markets.

The yield on 30-year gilts plummeted 24 basis points to 4.75pc, while the 10-year was down to 4.1pc.

11:19 AM

Bank of England steps into bond market

The Bank of England has stepped in to calm markets as it warned of 'material risk' to UK stability.

In a massive intervention this morning, the central bank said it will postpone quantitative tightening – the process of selling government bonds.

Instead, it's going to start buying up long-term bonds.

The Bank said: "Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability.

"This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy."

It's not clear how big this bond-buying programme will be, but the Bank said they'll be carried out on "whatever scale is necessary".

It comes after Kwasi Kwarteng's tax-cutting Budget sparked a slump in the pound and drove up government borrowing costs.

10:40 AM

Retail stocks slide after Boohoo warning

Boohoo retail stocks consumer confidence - REUTERS/Caitlin Ochs
Boohoo retail stocks consumer confidence - REUTERS/Caitlin Ochs

Retail stocks slumped this morning as a profit warning from Boohoo compounded fears about a consumer spending crunch.

The online fashion site cut its guidance for the year as it warned soaring energy and food bills would stop customers from splashing out on clothes and shoes. Its shares slumped 14pc.

That fuelled losses elsewhere in the sector, with Asos sliding almost 8pc. Other retailers including Dunelm, Pets at Home, WH Smith and Next also took a hit.

Royal Mail, which is heavily exposed to online retail, tumbled 8pc.

10:27 AM

Ray Dalio: UK behaving like emerging economy

Billionaire investor Ray Dalio has taken to Twitter to air his thoughts about the UK's fiscal crisis, and they're far from flattering.

He says the Government's failure to foresee the market response to its policies "suggests incompetence", adding: "Mechanistically, the UK government is operating like the government of an emerging country."

10:18 AM

More price rises coming, warns pub boss

Shepherd Neame pub beer inflation - Jamie Lorriman
Shepherd Neame pub beer inflation - Jamie Lorriman

The boss of brewer and pub group Shepherd Neame has warned that the price of a pint is likely to keep going up as surging costs continue.

The Kent-based company revealed a sharp rebound in sales and return to profit following the impact of the pandemic.

However, chief executive Jonathan Neame said the group is still under pressure due to rising costs in its supply chain.

He told PA that beer prices are now around 10pc higher year on year but could increase further.

He said:

Further rises in price are likely to be honest.

I think it's important to stress that price inflation has not been as high as many other products, and beer, particularly ales, are still incredibly good value.

But our key concerns from a price point of view have been gas, the cost and supply of CO2 and logistics as well.

10:02 AM

Virgin Atlantic lets male pilots and crew wear skirts to 'express their true identity'

Virgin Atlantic gender uniform -  Ben Queenborough/Virgin Atlantic
Virgin Atlantic gender uniform - Ben Queenborough/Virgin Atlantic

Away from the doom and gloom, here's something from Oliver Gill:

Virgin Atlantic is allowing male cabin crew and pilots to wear skirts and female counterparts to wear trousers, so staff can “express their true identity” at work.

The Sir Richard Branson-owned airline is dropping rules that require its employees to wear “gendered uniform options” in a UK-first for the aviation industry.

And the changes will not be limited to Virgin Atlantic staff. In a signal that the days of passengers being referred to as “Mr” and “Mrs” are coming to an end on flights, the carrier has changed its ticketing system to allow gender neutral markers.

Juha Jarvinen, Virgin Atlantic’s commercial chief said the airline wanted staff “to embrace their individuality and be their true selves at work”.

He added: “At Virgin Atlantic, we believe that everyone can take on the world, no matter who they are.

“We want to allow our people to wear the uniform that best suits them and how they identify and ensure our customers are addressed by their preferred pronouns.”

Read Ollie's full story here

09:52 AM

German consumer confidence slides further

Things aren't looking great over in Germany either, where consumer confidence remains on a record downward slide amid soaring inflation and a looming winter energy crisis.

GfK's confidence gauge fell to minus 42.5 points for October, hitting a record low for the fourth month in a row, following a revised September reading of minus 36.8 points.

Rolf Buerkl, GfK consumer expert, said: "The currently very high inflation rates of almost 8pc are leading to large real income losses among consumers and thus to a significant reduction in purchasing power.

"Many households are currently being forced to spend significantly more on energy."

The leaders of Germany's 16 states will meet today to discuss additional relief measures to help tackle the energy crisis – but without Chancellor Olaf Scholz, who tested positive for Covid-19 earlier this week.

09:41 AM

Kwarteng to ask bankers not to bet against the pound

Chancellor Kwasi KWarteng pound markets - JEFF OVERS/AFP
Chancellor Kwasi KWarteng pound markets - JEFF OVERS/AFP

There are some intriguing details emerging about Kwasi Kwarteng's meeting with Wall Street bosses today.

Sky News reports that the Chancellor will ask Wall Street bankers not to bet against the pound after it dropped to a record low against the dollar.

That would be a pretty extraordinary request from a Government that advocates free markets...

09:26 AM

UK 30-year yield hit highest since 1998

Government borrowing costs are still surging, with the 30-year yield soaring to its highest since 1998.

It comes as the Bank of England prepares for a £5bn gilt sale. It was originally planned for mid September but pushed back due to the Queen's death.

09:17 AM

Chinese yuan crashes to record low against dollar

China yuan Asian stocks - AP Photo/Andy Wong
China yuan Asian stocks - AP Photo/Andy Wong

If it's any consolation, the economic woe isn't just being felt in Britain.

China's internationally-traded yuan has tumbled to its lowest level on record as the dollar continues to gain ground.

The domestic currency also tumbled to its lowest since the global financial crisis in 2008.

The decline has fuelled speculation that China's central bank will slow the pace of monetary policy easing to avoid adding further pressure on the yuan.

Meanwhile, there were declines across Asian markets this morning, with Japan's Nikkei closing 1.5pc lower and Hong Kong stocks sinking 3pc.

09:04 AM

UK could end up in doom loop, warns top economist

The UK economy is at risk of ending up in a "doom loop" of falling currency and rising interest rates, a top economist has warned.

Julian Jessop struck a cautious tone over the outlook, but insisted the recent market meltdown had been an overreaction.

He told Radio 4's Today programme:

I think it is correct to be concerned about the fall in the pound and the rise in long term interest rates, and there is a risk that we do end up in a doom loop of a falling currency, rising interest rates and weaker growth which obviously would undermine the agenda the new government.

But I also think that people have overreacted in the heat of the last few days.

08:54 AM

Kwarteng to meet Wall Street bosses today

Kwasi Kwarteng will have another tricky meeting on his hands today when he tries to reassure US banking bosses that the Government hasn't lost control of the economy.

The meeting will be with Wall Street firms including Bank of America, JP Morgan, Standard Chartered, Citi, UBS, Morgan Stanley and Bloomberg.

It comes after the Chancellor spoke to City chiefs yesterday and doubled down on his tax-cutting fiscal plans. He's due to unveil more details about reforms to financial regulations next month.

08:41 AM

FTSE risers and fallers

The FTSE 100 has slumped sharply at the open as the outlook for the UK continues to darken.

The blue-chip index tumbled more than 2pc, with sentiment dented by interventions from the IMF and Moody's.

Energy and mining stocks were the biggest drag on the index, as a strengthening dollar weighed on metal prices and Hurricane Ian sparked further oil supply cuts.

Rate-sensitive banks including HSBC and Lloyds dropped more than 4pc.

There were also losses for retailers amid rising fears about consumer confidence. Burberry bucked the trend, rising 3.6pc after it named Daniel Lee as its new chief creative officer, replacing Riccardo Tisci.

The domestically-focused FTSE 250 also dropped 2.2pc, with Aston Martin tumbling 10pc amid ongoing concerns about its debt.

08:23 AM

UK economy is in a jam, pickle and stew, says Lord Rose

Lord Rose retail UK economy - Paul Grover for the Telegraph
Lord Rose retail UK economy - Paul Grover for the Telegraph

Lord Rose, the veteran retail executive and Tory peer, sums up the gloomy outlook with characteristic British understatement.

He told Radio 4's Today programme:

I think we're in a jam, pickle and stew. What business hates most of all is uncertainty and what we've got now is rather more of uncertainty.

I think we do not have the full picture. Businesses like to see the full runway.

Lord Rose added that it was "not necessary" to cut the top rate of tax "at this particular time"

08:16 AM

Shop price inflation hits record high

BRC shop price inflation - ANDY RAIN/EPA-EFE/Shutterstock
BRC shop price inflation - ANDY RAIN/EPA-EFE/Shutterstock

In a further sign of the doom this morning, food inflation hit a record high even before the slump in the pound, as businesses grappled with soaring costs and cuts to household spending.

Laura Onita reports:

Retail prices rose by 5.7pc during the first week of September, according to the BRC-NielsenIQ data, the highest rate of inflation since 2005 and accelerating from 5.1pc inflation in August.

Food inflation also hit its highest level on record, BRC-NielsenIQ said, with shoppers now paying 10.6pc more than they were a year ago.

Inflation of fresh produce accelerated strongly in September to reach 12.1pc, up from 10.5pc in August.

The figures were recorded earlier this month, before the mini-Budget was unveiled by Chancellor Kwasi Kwarteng and the pound crashed to an all-time low against the dollar. Sterling has dropped by 5pc against the US currency in the last week. City analysts think the drop could push retail inflation as high as 15pc.

Helen Dickinson, the BRC’s chief executive, said: “The war in Ukraine continued to drive up the price of animal feed, fertiliser and vegetable oil, causing fresh food inflation to rise significantly over the past few months, particularly for products such as margarine.”

08:07 AM

UK companies face highest borrowing costs on record

It's not just the Government facing sky-high borrowing costs – the crisis is hitting British companies too.

UK blue-chip companies are now facing their highest bond refinancing costs on record as Liz Truss's tax-cutting package wreaks havoc on the markets.

The difference in the rate investment-grade companies need to pay if they issue sterling bonds now compared to coupons on existing debt climbed to 325 points, according to Bloomberg data.

That's the highest level since the index began more than two decades ago, usurping the previous high hit in the aftermath of the 2008 financial crisis.

The jump means companies would have t pay an additional £3.25m annually for every £100m they borrow. It comes at a time when margins are already being eroded by soaring energy costs and supply chain troubles.

08:01 AM

FTSE 100 slumps at the open

The FTSE 100 has fallen sharply at the open amid renewed pessimism about the Government's tax-cutting economic policy.

The blue-chip index dropped 0.8pc to 6,927 points.

07:54 AM

IMF 'coming from errors of past', says Tory MP

While international bodies sound the alarm over UK policy, there's a dissenting view from Sir John Redwood.

The Tory MP told Radio 4's Today programme:

The IMF are coming from the errors of the past which they share with the world's leading central banks.

They didn't foresee the big inflation which they triggered, they didn't have sensible advice in good time to see off the inflation and now late in the day when the inflation is very visible for all to see they are suggesting taking measures to tackle it when the world has moved on and they should now be warning the world about the coming recession, which is in danger of digging in in many major countries because of the policies being followed and will be the enemy of the future.

I don't think the British Government should say anything to the IMF. I don't think we want a spat or a dialogue between the British government and the IMF.

The other thing I think the IMF and other commentators would be wise to do is judge the whole policy, because so far we have seen some tax proposals, we have not yet seen a series of supply measures which will clearly be needed at the same time as tax packages to make sure there is more investment and more growth in the economy.

07:45 AM

IMF intervention is rare, says former deputy chief

Adnan Mazarei, former deputy director of the IMF, says it's very rare for the world's lender of last resort to intervene in a developed country's economic policy.

He told Radio 4's Today programme:

The IMF doesn't make such strong statements about G7 countries. These statements are common with regard to emerging market countries with regard to the problematic policies but not often about G7 countries.

I think they are worried that the tax cuts are permanent. They are afraid that the Budget financing needs will go up, and they are requiring more borrowing domestically... inflation rising requiring interest rate rises by the Bank of England and there being a policy conflict between the Treasury and the Bank of England at the same time the UK is running a large current account deficit and relies on foreign financing.

When public sector borrowing requirements go up in order to be able to finance them against a background of inflation, the Bank of England will have to raise interest rates, but of course if it raises interest rates it has the feedback effect on the cost of borrowing for the government and so forth and so forth.

But the key issue now is that there is also a sense of problems in the country's economic management and their ability to handle issues which could lead to problems with inflation and financial market difficulties, for example we have seen problems in the mortgage market which will hurt the UK household.

07:39 AM

What did the IMF say?

This morning's fall in the pound has been sparked mainly by a hugely unusual intervention by the IMF. Here's some more detail:

The International Monetary Fund has urged Liz Truss to reverse the decision to abolish the top rate of income tax, in a highly unusual attack on the economic policy of a G7 country.

The world’s lender of last resort heaped pressure on Ms Truss and the Chancellor, as it urged Kwasi Kwarteng to use his fiscal plan in November to change course.

The IMF said it was “closely monitoring recent economic developments in the UK and are engaged with the authorities" and warned that the fiscal stimulus risked undermining the Bank of England’s efforts to curb inflation.

A spokesman for the Washington DC-based organisation said Mr Kwarteng's announcement in November would “present an early opportunity for the UK Government to consider ways to provide support that is more targeted and reevaluate the tax measures, especially those that benefit high-income earners”.

It is an extremely rare intervention by the IMF over a developed country’s economic policy.

Read the full story: IMF urges Truss to reverse top rate tax cut in rare intervention

07:37 AM

Pound slips back below $1.07

After a robust recovery on Tuesday, sterling is back in the red.

The pound slipped back below $1.07 after a highly unusual intervention by the IMF stoked investor concerns.

While it's comfortably above the all-time low of below $1.04 hit on Monday, the pound is still languishing in historical terms and many traders are betting it will hit parity by the end of the year.

07:34 AM

Pound falls again

Good morning.

The pound has sunk back into the red after two major interventions last night reignited investor concerns about the UK's tax-cutting Budget.

In an extraordinary development, the IMF urged Prime Minister Liz Truss to reverse her economic policies – pointing particularly to the decision to scrap the higher rate of income tax.

Ratings agency Moody's also warned that the policies risked "permanently weakening the UK's debt affordability", in the strongest suggestion yet that the country is facing a credit rating downgrade.

The pound, which crashed to an all-time low against the dollar earlier this week, dipped back below $1.07.

5 things to start your day

1) IMF urges Truss to reverse top rate tax cut in rare intervention Highly unusual move by world's lender of last resort condemned by senior Tories as it adds to pressure on PM and Chancellor

2) Building societies under pressure as lending costs rocket Smaller lenders are more exposed to swings in wholesale interest rates than larger high street banks, which lend off their deposit bases.

3) Bank signals ‘significant’ response to turmoil BoE chief economist Huw Pill was speaking as long-term borrowing costs hit their highest level since 2002

4) Fears of job cuts as MailOnline and Daily Mail to merge operations It comes as the publisher attempts to forge a digital future for titles that frequently overlap and compete.

5) Christmas shopping chaos looms as Royal Mail staff plan 19 days of walkouts Union leaders have launched a significant escalation in their industrial dispute with Royal Mail, warning of severe disruption to deliveries

What happened overnight

Sterling dipped again this morning, falling nearly 1pc against to dollar to $1.0634.

Asia resumed its downwards trend, with Tokyo, Hong Kong and Seoul all down more than 2pc, while Shanghai, Sydney, Singapore, Wellington, Taipei, Manila and Jakarta were also off.

Coming up today

  • Economics: BRC shop price index (UK), crude oil inventories (US), pending homes sales (US), gross domestic product (US)

  • Corporate: Boohoo, Everyman Media (interims)