FTSE slips as traders weigh up Liz Truss Conservative party conference speech
European stock markets were deep in the red on Wednesday, after posting sharp gains the session before.
In London, the FTSE 100 (^FTSE) fell 0.5% by the end of the day, while the CAC (^FCHI) tumbled 1.1% in Paris, and the Frankfurt DAX (^GDAXI) was 1.3% lower.
The negative mood came after a speech from UK prime minister Liz Truss who addressed the Conservative party conference in Birmingham.
She doubled down on promises that her policies will lead to growth and claimed that the “disruption” caused will be worth it.
However, this failed to calm investors, and the pound extended its fall against the dollar (GBPUSD=X).
"As prime minister Liz Truss took to the stage to try and shore up her support among her party and the country, the pound fell further back and government borrowing costs rose slightly," Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said.
"She may have hoped that her triple promise of growth would have calmed markets further but with nothing new to offer the table, her words have not had the desired effect so far. The pound dipped below $1.14, hovering around $1.135 and 10 year gilt yields lifted a little to whisker under 4%."
"Truss will still face an uphill struggle though to convince colleagues and voters that reductions in public spending, which will be necessary to fund tax cuts, won’t end up denting productivity over the longer term instead, especially if working families are made poorer."
Elsewhere, the yield, or interest rate, on two-year gilts has risen back over 4%, having fallen steadily over the last week following the Bank of England’s (BoE) intervention.
Across the pond on Wall Street, the S&P 500 (^GSPC) dipped 1.4% by the time of the European close, and the tech-heavy Nasdaq (^IXIC) fell 1.9%. The Dow Jones (^DJI) edged 1% lower.
It came as the OPEC+ Joint Ministerial Monitoring Committee has recommended a cut of 2 million barrels of oil per day, at their meeting in Vienna. This is the equivalent of around 2% of global oil demand, as the group looks to stop a slide in oil prices caused by the weakening global economy.
On Monday and Tuesday this week, S&P 500 posted its best two-day gain in roughly two years. However, the dollar suffered its biggest losses for years on Wednesday, after a dovish central bank surprise in Australia had investors wondering whether a peak is in sight for global interest rates.
Overnight the US greenback fell around 1.6% on the euro to test parity at $0.9999, and 1.3% against sterling to $1.1490 as the pound recovers from the turmoil after the mini-budget.
Read more: Supermarkets ‘refusing’ to pass on lower fuel prices to drivers, RAC says
The US dollar index fell 1.3%, its largest decline since March 2020 at the start of the pandemic. It was down more than 4% since hitting a 20-year peak last week.
“Early October optimism is still seeping through financial markets, with hopes rising that the relentless hikes in interest rates by the Federal Reserve could slow and even soon reverse," Streeter added.
“Investors are clinging onto every shred of evidence which may point in this direction, such as US job vacancy stats which dropped sharply in September.
“But there is still every chance that the rays of light they are glimpsing will be eclipsed by a fresh determination by policymakers to stay the course on rate rises until inflation is brought down considerably further.”
Watch: US labour market starts to cool as job openings drop
Stocks in Asia were mixed higher overnight, with the Hang Seng (^HSI) playing catch-up to the rally in global equities, surging more than 6% in Hong Kong as trading resumed after a holiday.
It was led by technology and finance firms.
In Tokyo, the Nikkei (^N225) climbed 0.5% on the day while the Shanghai Composite (000001.SS) remained closed for the Golden Week holiday.
