8.35am: CBI welcomes tax U-turn
The CBI, which represents British businesses, have welcomed the decision not to abolish the 45p tax rate.
Tony Danker, director-general of the CBI, has told Radio 4’s Today programme that scrapping the plan should help markets stabilise.
Danker said: "Businesses up and down the country want the markets to stabilise."
"That is an absolute precondition to investment and growth, and it’s a precondition to getting onto these very good reforms."
"So yes I think it’s a good development this morning." he said.
8.10am: FTSE 100 opens sharply lower
FTSE 100 has opened sharply lower as expected after the heavy falls in the US on Friday and with investors nervously watching developments at Credit Suisse (SIX:CSGN) after the bank’s management moved to reassure both staff and investors over the weekend over its financial strength.
At 8.05am the lead index was down 65.56 points at 6,828.25 while the broader FTSE 250 was 131 points lower at 17,038.
In the UK, the chancellor announced that plans to cut the higher rate of tax have been scrapped in what commentators described as a humiliating U-turn coming only a day after prime minister, Liz Truss, said there would be no change to policy.
The pound initially jumped against the US dollar on the news before falling back and is now just 0.2% higher at US$1.1192.
On Credit Suisse, Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said: "The share price is down below 4 francs a share, and the credit default swaps are going through the roof.
"The 5-year CDS for Credit Suisse spiked to 250 from around 60 at the start of the year. It means that the market is aggressively pricing a default for one of the biggest Swiss banks.
"Is it possible? Yes, it is possible, but it is highly unlikely. Because Credit Suisse is certainly ‘too big to fail’."
On a quiet day of company news life-saving technology company, Halma (LON:HLMA) PLC, said it has acquired Maryland-based medical consumable devices outfit IZI Medical Products in a deal valued at as much as US$168.0mln.
7.48am: Pound to rise further after tax U-turn
Scrapping the abolition of the 45p top end tax rate is a ‘big deal’ for the pound, says Viraj Patel, macro strategist at Vanda Research.
He predicts the pound may push higher this week, as the damage caused by Kwasi Kwarteng’s mini-budget is unwound.
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
7.30am: Chancellor confirms plans to cut higher rate of tax have been scrapped
The chancellor has confirmed that plans to cut the higher rate of tax have been scrapped.
"It is clear that the abolition of the 45p tax rate has become a distraction from our overriding mission to tackle the challenges facing our country."
"We get it and we listened" he said.
We get it, and we have listened. pic.twitter.com/lOfwHTUo76— Kwasi Kwarteng (@KwasiKwarteng) October 3, 2022
7.25am: Pound jumps on news of government U-turn
The pound advanced against the dollar on the expected announcement that the government will scrap plans to cut the higher rate of tax.
Sterling is up 0.7% to US$1.2453 and is up 0.20% to EUR0.982.
£ https://t.co/BQC05McL4c pic.twitter.com/dr5V5Zqzco— Harry Cole (@MrHarryCole) October 3, 2022
7.15am: UK government to scrap plans to cut higher rate of tax
Monday is expected to see Kwasi Kwarteng, the chancellor, announce a huge U-turn with various media outlets reporting he will announce that he is scrapping plans to cut the highest rate of tax.
Only yesterday Liz Truss told the BBC’s Laura Kuenssberg that she was committed to sticking to the plan, announced in the mini-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.
The Sun’s political editor, Harry Cole, first broke the news of the U-turn last night.
????????????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
7.00am: FTSE 100 to open lower
FTSE 100 is expected to open lower on Monday following heavy losses in the US on Friday and with ongoing nervousness about the state of the UK finances.
Concerns over the solvency of Credit Suisse (SIX:CSGN) will also be in focus with management moving to reassure staff and investors over the weekend that the bank has a strong capital and liquidity position.
Spread betting companies are calling the lead index down by around 50 points.
The Dow closed Friday down 500 points, 1.7%, at 28,726, the Nasdaq Composite lost 162 points, 1.5%, to 10,576 and the S&P 500 dropped 55 points, 1.5%, to 3,586.
The session dropped the S&P 500 to its lowest close of 2022, and the Nasdaq clinched its worst month since April.
In the UK today, there is speculation that the UK government is going to scrap plans to cut the highest rate of tax, while manufacturing PMI figures are also due.