8.31am: Mortgage deals hit by chaos
Lenders are pulling mortgage deals for new customers in the wake of the chaos in the currency and gilt markets.
Virgin Money (LON:VM) and Skipton Building Society temporarily withdrew offers and hope to reprice them soon. Halifax, the UK's largest mortgage lender withdrew products offering lower interest rates in return for arrangement fees.
And the repricing could be brutal, according to Bank of America (NYSE:BAC), perhaps at 6.-7%.
8.25am: Sterling did well last week (against the St Helena pound)
The pound has been through the shredder compared to most other currencies in the last week.
Look away now if you don't want to see the damage (courtesy a chart from Bloomberg).
Of the 150 or so currencies Bloomberg tracks, the British Pound is down against every single one from last week apart from the Chilean Peso, Gibraltar Pound, Falkland Islands Pound, St. Helena Pound. pic.twitter.com/Ervic7Fpz6— David Ingles (@DavidInglesTV) September 27, 2022
8.18am: Tentative gains for Footsie
Leading shares have opened in the green as expected.
The FTSE 100 is up 15.77 points or 0.22% at 7036.72, while the pound is off its best but is still up 0.1226% at US$1.078.
Richard Hunter, head of markets at interactive investor, said: "The FTSE100 opened in positive territory, underpinned by tentative relief gains in stocks which have recently come under fire.
"Nonetheless, the weakness as evidenced by further declines in the likes of the housebuilders and the retailers given a parlous economic backdrop which could yet come under additional pressure, has weighed heavily.
"Banks have also seen some selling activity despite a rising interest rate environment, with concerns inevitably arising that a recessionary environment could lead to higher levels of debt default. The premier index is now down by 4.6% in the year to date, which remains a relatively robust performance in comparison to its global peers and indeed its more domestically-focused sibling, the FTSE250, which has now declined by over 24% this year.”
Given the statement from the Bank of England on Monday, which said it intended to do nothing until its next meeting despite the plunge in sterling, a speech from its chief economist Huw Pill today has more at stake than perhaps earlier expected. Some economists believe that, despite the Bank declining an emergency rate rise, this week will see a number of members of its monetary policy committee attempting to support sterling by making tough comments about the need for increases.
Meanwhile chancellor Kwasi Kwarteng is meeting City bankers and insurers today, in the wake of his badly received tax-cutting mini-budget.
The get together was originally about plans to re-energise the City but the plunge in the pound is likely to be an unavoidable topic.
7.52am: UK market set for early move higher
As yesterday, all the action is likely to be in the currency and gilt markets, at least initially.
The FTSE 100 closed virtually flat, up just 2.35 points, and spread betters IG Index expect a riser of 10 points or so when trading begins today.
European Opening Calls:#FTSE 7030 +0.13%#DAX 12284 +0.46%#CAC 5792 +0.40%#AEX 643 +0.45%#MIB 21345 +0.65%#IBEX 7550 +0.55%#OMX 1818 +0.35%#SMI 10106 +0.33%#STOXX 3357 +0.44%#IGOpeningCall— IGSquawk (@IGSquawk) September 27, 2022
Meanwhile the pound, which at one point hit an all time low of US$1.0348 yesterday in the wake of the badly received mini-budget on Friday, has edged up 0.3636% to US$1.0806 this morning.
A statement from the Treasury late yesterday that there would be a spending statement on 23 November and an expected but do-nothing comment from the Bank of England has hardly helped sentiment.
But many in the City believe the Bank will have to act before its next scheduled meeting at the start of November if events get out of hand.
Jim Reid of Deutshe Bank said: "Markets are still expecting an incredibly fast pace rate hikes ahead, with around 150bps priced in by the time of the next policy meeting on November 3, albeit that was down from 200bps at one point in the day."
UK gilts also had another traumatic day.
Reid said: "The country’s government bonds were completely routed for a second day, with yields on 5yr gilts up by +47.8bps to a post-2008 high of 4.52%. Bear in mind that follows on from the +51.0bps move on Friday, which itself was the largest daily rise since January 1985 when there was a 200bps rate hike, so these are not the sort of moves we’re used to seeing every day."
In the US the S&P 500 fell 1.03%, down for a 5th consecutive session to close at its lowest level so far this year while the Dow Jones Industrial Average was down 1.11%.
In Asia, trading is mixed, with the Nikkei and Shanghai Composite moving ahead but the Hang Seng lower.