High pound on tax rate 45p. Recession fears mount – live business | Business

Elsewhere in the markets, shares in investment bank Credit Suisse have dropped 10% in early trading to a new record low.

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The fall comes despite the chief executive of Credit Suisse reassuring staff that the globally significant Swiss bank has a solid balance sheet, after credit markets rated its risk of default as the highest in a decade.

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Credit Suisse now down another 9% as CEO Memo fails to calm markets pic.twitter.com/sKNwgjMC4P

— IG (@IGcom) October 3, 2022

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In a memo to staff on Friday, Ulrich Körner said there were “many factually inaccurate statements being made” in media coverage of the bank’s crisis, which has seen its share price plunge by 56% this year.

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Körner said:

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“I trust that you are not confusing our day-to-day stock price performance with the strong capital base and liquidity position of the bank,”

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“We are in the process of reshaping Credit Suisse for a long-term, sustainable future – with significant potential for value creation.

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“Given the deep franchise we have, with a longstanding focus on serving some of the world’s most successful entrepreneurs, I am confident we have what it takes to succeed.”

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Liz Truss had hoped to carve out a reputation as the new Iron Lady. Now, though, she will be seen as “highly malleable”, says Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

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Streeter explains that investors will be encouraged that the ‘more reckless’ nature of Truss’s administration can be reined in, saying;

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She has been manipulated into this U-turn after senior Conservatives yesterday came out in open revolt at the Treasury’s decision to scrap the 45p tax band for the wealthy while refusing to rule out cuts to welfare for the poorest.

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Admitting to a communication mistake rather than a serious policy mishap didn’t cut it. Now this embarrassing climb down, taking unfunded tax cuts off the table, which Chancellor Kwasi Kwarteng has called a distraction, will help reassure the markets a little that the more reckless nature of this new administration can be reined in by the Conservative party.

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A big part of the questionable battle plan to try and stimulate growth is being ripped up, which may actually help calm the feverish rise in borrowing costs for companies, homeowners and the government. But the credibility of the government in providing a steady hand on the tiller at a time of such economic uncertainty has been lost, perhaps irrecoverably.

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Streeter adds that Truss could yet decide to “change tack and Chancellor”, if the pound remains volatile in the weeks and months ahead.

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Anyway good luck to the Truss government on fracking, cutting employment rights, planning reform, and massive spending cuts.

— Sam Freedman (@Samfr) October 3, 2022

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The CBI, which represents British businesses, have welcomed the decision not to abolish the 45p tax rate.

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Tony Danker, director-general of the CBI, has told Radio 4’s Today programme that scrapping the plan should help markets stabilise.

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Danker says:

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Businesses up and down the country want the markets to stabilise.

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That is an absolute precondition to investment and growth, and it’s a precondition to getting onto these very good reforms.

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So yes I think it’s a good development this morning.

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If the markets stabilise, Danker hopes that the investment climate will also stabilise.

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Danker also says he agrees with Kwasi Kwarteng that the 45p tax cut had become a distraction from the supply-side reforms in the government’s growth plan.

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He says it is ‘absolutely essential’ that those reforms – which are “controversial enough” at the Conservative’s conference – were passed, as they will lift growth, he believes.

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It’s official: the UK government will not go ahead with its controversial plan to scrap the 45p top rate of tax paid by h igh earners.

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Chancellor Kwasi Kwarteng has announced the u-turn on Twitter, declaring:

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“We are not proceeding with the abolition of the 45p tax rate. We get it, and we have listened.

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Kwarteng says it has become clear that the plan has been ‘a distraction’ from the government’s mission to tackle the challenges facing the UK.

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By abandoning it, he says the government can focus on delivering the major parts of its growth package.

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We get it, and we have listened. pic.twitter.com/lOfwHTUo76

— Kwasi Kwarteng (@KwasiKwarteng) October 3, 2022

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Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.

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The pound is rallying this morning, on reports that the UK government is preparing a screeching u-turn on its plan to abolish the 45p top rate of income tax.

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Sterling has jumped by as much as a cent to over $1.126 – its highest level in over a week, just a week after it slumped to a record low around $1.035.

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The recovery was sparked by reports chancellor Kwasi Kwarteng may reverse the proposed scrapping of the 45p rate of income tax, just 10 days after it was announced in the mini-budget.

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The U-turn comes after strong opposition from several Tory MPs, after the mini-budget caused chaos in the financial markets last week amid concerns that Britain was increasing borrowing to fund tax cuts for the rich.

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Last Friday, ratings agency Standard & Poor’s cut the outlook for its AA credit rating for British sovereign debt to “negative” from “stable”, judging that prime minister Liz Truss’s tax cut plans would cause debt to keep rising.

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But it’s a remarkable twist; yesterday Truss said she was absolutely committed to abolishing the 45% top rate of tax.

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Major U-turn by Truss & Kwarteng – planned scrapping of 45p top rate of tax will NOT go ahead

Markets react very positively; pound 1.17% against dollar in half an hour after U-turn announced

— Jack Parker (@JackParkr) October 3, 2022

\n”,”url”:”https://twitter.com/JackParkr/status/1576817575690133504″,”id”:”1576817575690133504″,”hasMedia”:false,”role”:”inline”,”isThirdPartyTracking”:false,”source”:”Twitter”,”elementId”:”98c6d7f5-86de-46a8-b128-fda05c714e96″},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

Our Politics Live blogger Andrew Sparrow reports:

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\n

Only yesterday Liz Truss told the BBC’s Laura Kuenssberg that she was committed to sticking to the plan, announced in the min-budget, to abolish the 45% top rate of tax. Now the government is set to ditch it – after it became clear on the first day of the Conservative party conference that Truss would face a huge rebellion if she tried to force her MPs to vote for it.

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The Sun’s political editor, Harry Cole, first broke the news of the U-turn last night. He is co-writting a biography of Truss, and is one of the journalists seen as being close to her administration.

\n

“,”elementId”:”0c58c4ba-0fb8-40da-9399-9e3eccedfb90″},{“_type”:”model.dotcomrendering.pageElements.TweetBlockElement”,”html”:”

🚨🚨🚨

NEW: Liz Truss preparing to ditch 45p rate TODAY after late crisis talks with Chancellor

Humiliating climb down plan comes after day of acrimony on Brum

Announcement expected in morn in body blow to new Government

No denial from No10 this eve https://t.co/He8qwMayou

— Harry Cole (@MrHarryCole) October 2, 2022

\n”,”url”:”https://twitter.com/MrHarryCole/status/1576719243676364800″,”id”:”1576719243676364800″,”hasMedia”:false,”role”:”inline”,”isThirdPartyTracking”:false,”source”:”Twitter”,”elementId”:”fa5be0c8-a85b-4ffb-8938-cc143d86e348″},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

Andy is covering all the action from the Conservative Party conference here:

“,”elementId”:”5a30e6d9-58e3-4d1b-ae25-02ae47f626eb”},{“_type”:”model.dotcomrendering.pageElements.RichLinkBlockElement”,”url”:”https://www.theguardian.com/politics/live/2022/oct/03/truss-expected-to-abandon-plan-to-abolish-45-top-rate-of-income-tax-live”,”text”:”Truss expected to abandon plan to abolish 45% top rate of income tax – live”,”prefix”:”Related: “,”role”:”thumbnail”,”elementId”:”36349e08-8e95-424c-8d29-82b652730036″},{“_type”:”model.dotcomrendering.pageElements.SubheadingBlockElement”,”html”:”

Also coming up today….

“,”elementId”:”c6986310-f85b-40d8-80f2-60cca6d2f909″},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

European stock markets are set to start the new month with fresh losses, as recession fears mount.

“,”elementId”:”7bc1479c-05c2-497e-90b2-43b90f51847f”},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

Earlier today, data shows that Japan’s manufacturing activity grew at its slowest pace since the start of last year in September.

“,”elementId”:”1b5b799c-d0e3-4e85-9b07-e2612b28649c”},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

Japanese factories were hit by a slide in output and new orders, due to weakening demand from China, the United States and other trading partners.

“,”elementId”:”ef644206-d7ac-46e9-b202-676b9eb820a7″},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

Joe Hayes, senior economist at S&P Global Market Intelligence, which compiles the survey, explained:

“,”elementId”:”43822ce8-2a32-4f97-b247-f150fe71f396″},{“_type”:”model.dotcomrendering.pageElements.BlockquoteBlockElement”,”html”:”

\n

“Weakness in Japan’s manufacturing sector persisted in September and even turned worse.

\n

“,”elementId”:”984739f4-5989-4954-b41c-ba8c96892fff”},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

That’s a bad sign for demand in the global economy.

“,”elementId”:”2e2714d4-dea2-45c7-b9b2-6e0e5e5e890e”},{“_type”:”model.dotcomrendering.pageElements.TweetBlockElement”,”html”:”

European Opening Calls:#FTSE 6839 -0.79%#DAX 11942 -1.43%#CAC 5686 -1.33%#AEX 632 -1.31%#MIB 20373 -1.34%#IBEX 7277 -1.22%#OMX 1808 -1.16%#SMI 10160 -1.05%#STOXX 3274 -1.33%#IGOpeningCall

(Note – these are % from previous cash close, futures largely flat).

— IGSquawk (@IGSquawk) October 3, 2022

\n”,”url”:”https://twitter.com/IGSquawk/status/1576811268601970688″,”id”:”1576811268601970688″,”hasMedia”:false,”role”:”inline”,”isThirdPartyTracking”:false,”source”:”Twitter”,”elementId”:”1d3ad01b-fb5b-4691-a5ee-b692d9de1c6e”},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

We’ll also find out how factories in the UK, eurozone and US fared last month, as worries about the global downturn deepen.

“,”elementId”:”1251e6f5-a6ed-469d-9660-e876d770846e”},{“_type”:”model.dotcomrendering.pageElements.SubheadingBlockElement”,”html”:”

The agenda

“,”elementId”:”e215b3ee-16eb-4c30-930e-b75a7734b902″},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

    \n

  • 9am BST: Eurozone manufacturing PMI report for September

  • \n

  • 9.30am BST: UK manufacturing PMI report for September

  • \n

  • 3pm BST: US manufacturing PMI report for September

  • \n

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main events

Elsewhere in the markets, shares in investment bank Credit Suisse have dropped 10% in early trading to a new record low.

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The fall comes despite the chief executive of Credit Suisse reassuring staff that the globally significant Swiss bank has a solid balance sheet, after credit markets rated its risk of default as the highest in a decade.

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Credit Suisse now down another 9% as CEO Memo fails to calm markets pic.twitter.com/sKNwgjMC4P

— IG (@IGcom) October 3, 2022

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In a memo to staff on Friday, Ulrich Körner said there were “many factually inaccurate statements being made” in media coverage of the bank’s crisis, which has seen its share price plunge by 56% this year.

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Körner said:

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“I trust that you are not confusing our day-to-day stock price performance with the strong capital base and liquidity position of the bank,”

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“We are in the process of reshaping Credit Suisse for a long-term, sustainable future – with significant potential for value creation.

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“Given the deep franchise we have, with a longstanding focus on serving some of the world’s most successful entrepreneurs, I am confident we have what it takes to succeed.”

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Liz Truss had hoped to carve out a reputation as the new Iron Lady. Now, though, she will be seen as “highly malleable”, says Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

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Streeter explains that investors will be encouraged that the ‘more reckless’ nature of Truss’s administration can be reined in, saying;

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She has been manipulated into this U-turn after senior Conservatives yesterday came out in open revolt at the Treasury’s decision to scrap the 45p tax band for the wealthy while refusing to rule out cuts to welfare for the poorest.

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Admitting to a communication mistake rather than a serious policy mishap didn’t cut it. Now this embarrassing climb down, taking unfunded tax cuts off the table, which Chancellor Kwasi Kwarteng has called a distraction, will help reassure the markets a little that the more reckless nature of this new administration can be reined in by the Conservative party.

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A big part of the questionable battle plan to try and stimulate growth is being ripped up, which may actually help calm the feverish rise in borrowing costs for companies, homeowners and the government. But the credibility of the government in providing a steady hand on the tiller at a time of such economic uncertainty has been lost, perhaps irrecoverably.

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Streeter adds that Truss could yet decide to “change tack and Chancellor”, if the pound remains volatile in the weeks and months ahead.

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Anyway good luck to the Truss government on fracking, cutting employment rights, planning reform, and massive spending cuts.

— Sam Freedman (@Samfr) October 3, 2022

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The CBI, which represents British businesses, have welcomed the decision not to abolish the 45p tax rate.

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Tony Danker, director-general of the CBI, has told Radio 4’s Today programme that scrapping the plan should help markets stabilise.

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Danker says:

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Businesses up and down the country want the markets to stabilise.

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That is an absolute precondition to investment and growth, and it’s a precondition to getting onto these very good reforms.

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So yes I think it’s a good development this morning.

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If the markets stabilise, Danker hopes that the investment climate will also stabilise.

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Danker also says he agrees with Kwasi Kwarteng that the 45p tax cut had become a distraction from the supply-side reforms in the government’s growth plan.

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He says it is ‘absolutely essential’ that those reforms – which are “controversial enough” at the Conservative’s conference – were passed, as they will lift growth, he believes.

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It’s official: the UK government will not go ahead with its controversial plan to scrap the 45p top rate of tax paid by h igh earners.

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Chancellor Kwasi Kwarteng has announced the u-turn on Twitter, declaring:

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“We are not proceeding with the abolition of the 45p tax rate. We get it, and we have listened.

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Kwarteng says it has become clear that the plan has been ‘a distraction’ from the government’s mission to tackle the challenges facing the UK.

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By abandoning it, he says the government can focus on delivering the major parts of its growth package.

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We get it, and we have listened. pic.twitter.com/lOfwHTUo76

— Kwasi Kwarteng (@KwasiKwarteng) October 3, 2022

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Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.

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The pound is rallying this morning, on reports that the UK government is preparing a screeching u-turn on its plan to abolish the 45p top rate of income tax.

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Sterling has jumped by as much as a cent to over $1.126 – its highest level in over a week, just a week after it slumped to a record low around $1.035.

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aster/850.jpg?width=480&quality=85&auto=format&fit=max&s=8b4514b16fffcc90e414316310e4508f”,”width”:480},{“src”:”https://i.guim.co.uk/img/media/e67ee25fdee01aea28db8109e3e6bd44bba34892/0_0_850_471/master/850.jpg?width=480&quality=45&auto=format&fit=max&dpr=2&s=77b22fc2fce91a2229ebb3e0009cd476″,”width”:960}]}],”elementId”:”c20ea0f9-4d0f-4c65-a832-9df9280b355e”},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

The recovery was sparked by reports chancellor Kwasi Kwarteng may reverse the proposed scrapping of the 45p rate of income tax, just 10 days after it was announced in the mini-budget.

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The U-turn comes after strong opposition from several Tory MPs, after the mini-budget caused chaos in the financial markets last week amid concerns that Britain was increasing borrowing to fund tax cuts for the rich.

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Last Friday, ratings agency Standard & Poor’s cut the outlook for its AA credit rating for British sovereign debt to “negative” from “stable”, judging that prime minister Liz Truss’s tax cut plans would cause debt to keep rising.

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But it’s a remarkable twist; yesterday Truss said she was absolutely committed to abolishing the 45% top rate of tax.

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Major U-turn by Truss & Kwarteng – planned scrapping of 45p top rate of tax will NOT go ahead

Markets react very positively; pound 1.17% against dollar in half an hour after U-turn announced

— Jack Parker (@JackParkr) October 3, 2022

\n”,”url”:”https://twitter.com/JackParkr/status/1576817575690133504″,”id”:”1576817575690133504″,”hasMedia”:false,”role”:”inline”,”isThirdPartyTracking”:false,”source”:”Twitter”,”elementId”:”98c6d7f5-86de-46a8-b128-fda05c714e96″},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

Our Politics Live blogger Andrew Sparrow reports:

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\n

Only yesterday Liz Truss told the BBC’s Laura Kuenssberg that she was committed to sticking to the plan, announced in the min-budget, to abolish the 45% top rate of tax. Now the government is set to ditch it – after it became clear on the first day of the Conservative party conference that Truss would face a huge rebellion if she tried to force her MPs to vote for it.

\n

The Sun’s political editor, Harry Cole, first broke the news of the U-turn last night. He is co-writting a biography of Truss, and is one of the journalists seen as being close to her administration.

\n

“,”elementId”:”0c58c4ba-0fb8-40da-9399-9e3eccedfb90″},{“_type”:”model.dotcomrendering.pageElements.TweetBlockElement”,”html”:”

🚨🚨🚨

NEW: Liz Truss preparing to ditch 45p rate TODAY after late crisis talks with Chancellor

Humiliating climb down plan comes after day of acrimony on Brum

Announcement expected in morn in body blow to new Government

No denial from No10 this eve https://t.co/He8qwMayou

— Harry Cole (@MrHarryCole) October 2, 2022

\n”,”url”:”https://twitter.com/MrHarryCole/status/1576719243676364800″,”id”:”1576719243676364800″,”hasMedia”:false,”role”:”inline”,”isThirdPartyTracking”:false,”source”:”Twitter”,”elementId”:”fa5be0c8-a85b-4ffb-8938-cc143d86e348″},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

Andy is covering all the action from the Conservative Party conference here:

“,”elementId”:”5a30e6d9-58e3-4d1b-ae25-02ae47f626eb”},{“_type”:”model.dotcomrendering.pageElements.RichLinkBlockElement”,”url”:”https://www.theguardian.com/politics/live/2022/oct/03/truss-expected-to-abandon-plan-to-abolish-45-top-rate-of-income-tax-live”,”text”:”Truss expected to abandon plan to abolish 45% top rate of income tax – live”,”prefix”:”Related: “,”role”:”thumbnail”,”elementId”:”36349e08-8e95-424c-8d29-82b652730036″},{“_type”:”model.dotcomrendering.pageElements.SubheadingBlockElement”,”html”:”

Also coming up today….

“,”elementId”:”c6986310-f85b-40d8-80f2-60cca6d2f909″},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

European stock markets are set to start the new month with fresh losses, as recession fears mount.

“,”elementId”:”7bc1479c-05c2-497e-90b2-43b90f51847f”},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

Earlier today, data shows that Japan’s manufacturing activity grew at its slowest pace since the start of last year in September.

“,”elementId”:”1b5b799c-d0e3-4e85-9b07-e2612b28649c”},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

Japanese factories were hit by a slide in output and new orders, due to weakening demand from China, the United States and other trading partners.

“,”elementId”:”ef644206-d7ac-46e9-b202-676b9eb820a7″},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

Joe Hayes, senior economist at S&P Global Market Intelligence, which compiles the survey, explained:

“,”elementId”:”43822ce8-2a32-4f97-b247-f150fe71f396″},{“_type”:”model.dotcomrendering.pageElements.BlockquoteBlockElement”,”html”:”

\n

“Weakness in Japan’s manufacturing sector persisted in September and even turned worse.

\n

“,”elementId”:”984739f4-5989-4954-b41c-ba8c96892fff”},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

That’s a bad sign for demand in the global economy.

“,”elementId”:”2e2714d4-dea2-45c7-b9b2-6e0e5e5e890e”},{“_type”:”model.dotcomrendering.pageElements.TweetBlockElement”,”html”:”

European Opening Calls:#FTSE 6839 -0.79%#DAX 11942 -1.43%#CAC 5686 -1.33%#AEX 632 -1.31%#MIB 20373 -1.34%#IBEX 7277 -1.22%#OMX 1808 -1.16%#SMI 10160 -1.05%#STOXX 3274 -1.33%#IGOpeningCall

(Note – these are % from previous cash close, futures largely flat).

— IGSquawk (@IGSquawk) October 3, 2022

\n”,”url”:”https://twitter.com/IGSquawk/status/1576811268601970688″,”id”:”1576811268601970688″,”hasMedia”:false,”role”:”inline”,”isThirdPartyTracking”:false,”source”:”Twitter”,”elementId”:”1d3ad01b-fb5b-4691-a5ee-b692d9de1c6e”},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

We’ll also find out how factories in the UK, eurozone and US fared last month, as worries about the global downturn deepen.

“,”elementId”:”1251e6f5-a6ed-469d-9660-e876d770846e”},{“_type”:”model.dotcomrendering.pageElements.SubheadingBlockElement”,”html”:”

The agenda

“,”elementId”:”e215b3ee-16eb-4c30-930e-b75a7734b902″},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

    \n

  • 9am BST: Eurozone manufacturing PMI report for September

  • \n

  • 9.30am BST: UK manufacturing PMI report for September

  • \n

  • 3pm BST: US manufacturing PMI report for September

  • \n

“,”elementId”:”df6b3895-4ab8-419d-b588-352f94c7b7da”}],”attributes”:{“pinned”:false,”keyEvent”:true,”summary”:false},”blockCreatedOn”:1664778055000,”blockCreatedOnDisplay”:”02.20 EDT”,”blockLastUpdated”:1664778073000,”blockLastUpdatedDisplay”:”02.21 EDT”,”blockFirstPublished”:1664778055000,”blockFirstPublishedDisplay”:”02.20 EDT”,”blockFirstPublishedDisplayNoTimezone”:”02.20″,”title”:”Introduction: Sterling rallies on reports of 45p tax rate u-turn”,”contributors”:[],”primaryDateLine”:”Mon 3 Oct 2022 03.33 EDT”,”secondaryDateLine”:”First published on Mon 3 Oct 2022 02.20 EDT”}],”filterKeyEvents”:false,”id”:”key-events-carousel-mobile”}”>

filters beta

Credit Suisse shares hit a record low

Elsewhere in the markets, shares in the investment bank attributed to him Swiss It fell 10% in early trading to a new record low.

Come fall though CEO Credit Suisse Reassure employees that the globally significant Swiss bank has a strong balance sheet, after credit markets rated default risk as the highest in a decade.

Credit Suisse now down another 9% as CEO Memo fails to calm markets pic.twitter.com/sKNwgjMC4P

— IG (@IGcom) October 3, 2022

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In a note to staff on Friday, Ulrich Corner He said there were “many inaccurate statements made” in media coverage of the bank’s crisis, which has sent its stock price down 56% this year.

Corner said:

“I trust you do not confuse our daily stock price performance with the bank’s strong capital base and liquidity position,”

“We are reshaping Credit Suisse for a sustainable long-term future – with great potential for value creation.

“Given the profound excellence we have, with a long-standing focus on serving some of the world’s most successful entrepreneurs, I’m confident we have what it takes to succeed.”

The UK government still has “a lot to do” to restore its credibility, he warns Gene FoleyHead of FX Strategy at Rabobank.

“Obviously sterling has done better in the news, but there are still a lot of questions and in the end the 45p tax rate was just a small part of the unfunded tax cuts announced.

The question remains, is this sufficient? The answer will be clear in a few weeks when the bank of emergency procedures is over.

“British assets, sterling and gold are yet to run out, and the British government has a lot to do to restore credibility.”

Haven’t looked at this for a while but the figures won’t have changed that much. The 45p tax rate isn’t a big deal in terms of government revenue. The basic rate has a much bigger impact. pic.twitter.com/1058S5Zxya

— Rick 🇺🇦 (@FlipChartRick) October 3, 2022

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I haven’t looked at this in a while but the numbers won’t change much. The 45p tax rate is not a big deal in terms of government revenue. The base rate has a much greater impact. pic.twitter.com/1058S5Zxya

– Rick 🇺🇦 (FlipChartRick) October 3, 2022

Analyst: Truss looks “too resilient”, rather than the new Iron Lady

Liz Truss hoped to earn a reputation as the new Iron Lady. Now, though, it will be seen as “too resilient,” she says Susanna StreeterSenior Investment and Markets Analyst at Hargreaves Lansdon.

Streeter explains that investors will be encouraged that the “more reckless” nature of Truss management can be curbed, saying;

It was manipulated at this juncture after yesterday’s top conservatives went out in open revolt over the Treasury’s decision to scrap the 45p tax range for the rich while refusing to rule out cuts to welfare for the poor.

An admission of a communication error did not succeed rather than a serious political mishap. Now that embarrassing rollback, and the scrapping of unfunded tax cuts on the table, which Chancellor Kwasi Quarting has called a distraction, will help reassure markets a bit that the more reckless nature of this new administration can be curbed by the Conservative Party.

Much of the questionable battle plan to try to spur growth is being cut short, which could actually help cool a frantic rise in borrowing costs for businesses, homeowners and the government. But the government’s credibility to offer a steady hand over plowing at a time of such economic uncertainty has been lost, perhaps irretrievably.

Streeter adds that Truss may decide to “change course and advisor” if the pound remains volatile in the coming weeks and months.

Anyway good luck to the Truss government on fracking, cutting employment rights, planning reform, and massive spending cuts.

— Sam Freedman (@Samfr) October 3, 2022

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Anyway, good luck for the Truss government cracking, cutting employment rights, planning reform, and massive spending cuts.

– Sam Friedman (Samfr) October 3, 2022

Pound jumps as UK PM Truss & chancellor Kwarteng have abandoned plan to abolish top rate of income tax for highest earners in astonishing U-turn. Kwarteng acknowledged that plan to axe 45% rate on earnings >£150,000 in a move to be paid for by borrowing had become “distraction.” pic.twitter.com/9hcxxL6FSz

— Holger Zschaepitz (@Schuldensuehner) October 3, 2022

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Sterling is jumping as British Prime Minister Truss and Chancellor Kwarteng abandon a plan to scrap the highest income tax rate for high-income earners in a stunning turn. Kwarteng admitted that the plan to cancel a 45% rate on earnings >150,000 pounds in a move to be paid back by borrowing had become a “distraction”. pic.twitter.com/9hcxxL6FSz

– Holger Zschaepitz (Schuldensuehner) October 3, 2022

Jan von GerrichSenior Analyst, Banking Group Nordeawarns that the pound may remain under pressure.

From a market perspective, he says, scrapping plans to scrap the top tax rate of 45 pence “is a good step in the right direction.”

It will take time for the markets to buy the message, but the pressure should ease.”

“Questions remain and sterling is likely to remain under pressure.”

CBI: 45p tax rate spin U is a good development.

The CBI, which represents British companies, welcomed the decision not to scrap the 45 pence tax rate.

Tony Dunkergeneral manager of CBIHe told Radio 4’s Today program that scrapping the plan should help markets stabilize.

Dunker says:

Companies across the country want the markets to stabilize.

This is an absolute precondition for investment and growth, and it is a prerequisite for joining these very good reforms.

So yeah I think it’s a good development this morning.

If markets stabilize, Duncker hopes the investment climate will stabilize as well.

Dunker also says he agrees with him Quasi Quarting The 45 pence tax cut has become a distraction from the supply-side reforms of the government’s growth plan.

He says it is “absolutely necessary” that those reforms – which were “controversial enough” at the Conservative Conference – be passed because they would lift growth, he believes.

The pound has now recovered all of its losses since Quarting’s mini budget pushed it down to record lows last week.

The pound jumped following news of the u-turn on the 45p rate abolition pic.twitter.com/KqGKok1hur

— Ed Conway (@EdConwaySky) October 3, 2022

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Kwarteng canceled 45p highest tax rate

It’s official: The UK government will not go ahead with its controversial plan to scrap the highest tax rate of 45 pence paid by high-income earners.

Advisor Quasi Quarting He announced the U-turn on Twitter, announcing:

We are not moving forward with the 45 pence tax rate abolition. We got it and we listened.

Kwarteng says it has become clear that the plan was a “distraction” from the government’s mission to tackle the challenges facing the UK.

By abandoning it, he says, the government can focus on delivering key parts of its growth package.

We get it, and we have listened. pic.twitter.com/lOfwHTUo76

— Kwasi Kwarteng (@KwasiKwarteng) October 3, 2022

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Pound up following reports that government is set for U-turn on income tax cut

More: https://t.co/wGCxvdZlSw pic.twitter.com/A60YVUrlLX

— Bloomberg UK (@BloombergUK) October 3, 2022

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He says eliminating the 45 pence cap tax rate is a “big deal” for sterling Viraj PatelAnd the macro strategist in Vanda Research.

The Pound is expected to rally higher this week, as the damage from the Kwasi Quarting mini-budget has been wiped out.

My estimates suggest $GBPUSD should be trading around 1.13-1.14 if the entire 'Kami-Kwasi budget' risk premium is unwound. Seems reasonable we get there in the next few sessions… 45p tax cut was the nail in the coffin for the pound last week. Taking this out is a big deal pic.twitter.com/LXwfCp3PWD

— Viraj Patel (@VPatelFX) October 3, 2022

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Suggest my estimates British Pounds / US Dollars It should be trading around 1.13-1.14 if the risk premium “Kami-Kawase Balance” is completely eliminated. It seems reasonable to get there in the next few sessions… The 45 pence tax cut was the nail in the coffin of the pound last week. Take out this is a big deal pic.twitter.com/LXwfCp3PWD

– Viraj Patel (VPatelFX) October 3, 2022

Introduction: Sterling rises on reports of 45 pence tax rate turnover

Good morning, and welcome to our renewed coverage of business, the global economy, and financial markets.

Sterling is rising this morning, on the back of reports that the UK government is preparing for a tumultuous turn over its plan to scrap the highest income tax rate of 45 pence.

Sterling jumped as much as a cent to more than $1.126 – its highest level in more than a week, just one week after dropping to a record low around $1,035.

Pound vs US dollar
Pound vs US dollar Photo: Refinitiv

The recovery was the spark reports Chancellor Quasi Quarting mayo reflect The proposed abolition of the income tax rate of 45 pence, just 10 days after it was announced in the mini-budget.

The switch comes after strong opposition from many Conservative MPs, after the mini-budget wreaked havoc in financial markets last week amid concerns that Britain was increasing borrowing to fund tax cuts for the wealthy.

Last Friday rating agency Standard & Poor’s cRegarding the outlook for its AA credit rating for British sovereign debt to “negative” from “stable”, considering that Prime Minister Liz Truss’ plans to cut taxes will lead to a continued rise in debt.

But it is a noticeable shift. Yesterday Truss said it was fully committed To abolish the highest tax rate of 45%.

Major U-turn by Truss & Kwarteng – planned scrapping of 45p top rate of tax will NOT go ahead

Markets react very positively; pound 1.17% against dollar in half an hour after U-turn announced

— Jack Parker (@JackParkr) October 3, 2022

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Major Shift by Truss & Kwarteng – Planned abolition of the 45p higher tax rate will not proceed

Markets react very positively. 1.17% of the pound against the dollar in half an hour after announcing the shift

JackParkr October 3, 2022

Our live political blog Andrew bird Reports:

Just yesterday, the BBC’s Liz Truss told Laura Koensberg she was committed to sticking to the plan, announced in the budget floor, to scrap the highest tax rate of 45%. Now the government is ready to give it up – after it became clear on the first day of the Conservative Party conference that Truss would face a major rebellion if she tried to force her MPs to vote for him.

The Sun’s political editor Harry Cole first broke the news of the turn last night. He co-wrote a biographer of Truss, a journalist who is seen as close to her management.

🚨🚨🚨

NEW: Liz Truss preparing to ditch 45p rate TODAY after late crisis talks with Chancellor

Humiliating climb down plan comes after day of acrimony on Brum

Announcement expected in morn in body blow to new Government

No denial from No10 this eve https://t.co/He8qwMayou

— Harry Cole (@MrHarryCole) October 2, 2022

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🚨🚨🚨

NEW: Liz Truss prepares to shed 45p today after belated crisis talks with Chancellor

Humiliating climb plan comes after a grueling day on Broome

Expect an announcement in the morning in a physical blow to the new government

No denial of No10 tonight https://t.co/He8qwMayou

– Harry Cole (@MrHarryCole) October 2, 2022

Andy covers all the action from the Conservative Party conference here:

As the day comes…

European stock markets are set to start the new month with fresh losses, as recession fears mount.

Earlier today, data showed that Japanese manufacturing activity grew at the slowest pace since the beginning of last year in September.

Japanese factories were hit by lower production and new orders due to weak demand from China, the United States and other trading partners.

Joe Hayes, chief economist at S&P Global Market Intelligence, who compiles the survey, explained:

The weakness in the Japanese manufacturing sector continued in September and only got worse.

This is a bad sign for demand in the global economy.

European Opening Calls:#FTSE 6839 -0.79%#DAX 11942 -1.43%#CAC 5686 -1.33%#AEX 632 -1.31%#MIB 20373 -1.34%#IBEX 7277 -1.22%#OMX 1808 -1.16%#SMI 10160 -1.05%#STOXX 3274 -1.33%#IGOpeningCall

(Note – these are % from previous cash close, futures largely flat).

— IGSquawk (@IGSquawk) October 3, 2022

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We’ll also find out how factories in the UK, the Eurozone and the US performed last month, as concerns about a global downturn deepened.

schedule of work

  • 9 am GMT: Eurozone Manufacturing PMI report for September

  • 9:30 a.m. GMT: UK September Manufacturing PMI report

  • 3pm GMT: US Manufacturing PMI report for September

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