Marketmind: Good Will Hunting

A look at the day ahead in European and global markets from Ankur Banerjee

Three days into the job, Jeremy Hunt has pretty much gutted British Prime Minister Liz Truss’ entire economic plan that propelled her to lead the government less than six weeks ago. The new finance minister’s policy reversal has lifted investors’ mood, leading to a rally across equities, bonds and some currencies.

With Truss’s spokesman batting down suggestions that Hunt was running the country, it remains to be seen how long the PM is able to survive the political maelstrom, even though she remains defiant. “I’m sticking around because I was elected to deliver for this country.”

The dramatic U-turn might lead to BoE not hiking interest rates in November by as much as previously anticipated (75-basis-point hike vs previous estimate of 100 basis points, according to Morgan Stanley (NYSE:) analysts). Meanwhile, a report from the Financial Times said that the BoE is likely to delay the sale of billions of pounds of government bonds.

Over in Australia, the central bank expects to raise interest rates further over the coming months, while minutes of its meeting last month showed that the surprise decision to slow the pace of rate increases was “finely balanced”.

Elsewhere, another day of intervention watch awaits the currency market as the yen remains perilously close to the major psychological barrier of 150 after touching a 32-year low of 149.10 against the dollar overnight.

The new low led to yet another response from the Japanese authorities that they are closely watching excessive currency moves.

On the corporate front, a source told Reuters that Credit Suisse Group AG has approached at least one Middle Eastern sovereign wealth fund for a capital injection.

Key developments that could influence markets on Tuesday:

Economic events: Sept car registration data from UK, Germany, France and Italy, Germany Oct ZEW survey, U.S. Sept industrial output data

Speakers: Riksbank’s Per Jansson and Bank of Canada’s Carolyn Rogers (NYSE:) to speak at different events

Earnings on the deck: J&J (NYSE:), Goldman and Netflix (NASDAQ:)

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