Marketmind: Truss drama deepens

A look at the day ahead in European and global markets from Anshuman Daga

Britain’s political drama keeps getting more and more interesting.

The abrupt resignation of Britain’s interior minister Suella Braverman, who criticised Liz Truss, reflects the continued erosion of the prime minister’s authority after just weeks in the job.

Officers from 1922 committee, in charge of running Britain’s Conservative Party leadership contests, are set to meet on Thursday to discuss the escalating leadership crisis, The Telegraph’s associate editor Christopher Hope tweeted.

And as markets watch the political chaos, there seems to be no respite for the beleaguered pound.

Sterling failed to get any support from British inflation rising back to double digits, which is likely to put more pressure on the Bank of England to step up rate hikes next month. The pound, which has shed 17% so far this year, slipped 0.1% to $1.1206 in Asian trade on Thursday.

Markets in the region are fixated on the yen, which is teetering at the break of 150 to the dollar, a level that would mark a 32-year-low and has long been seen as a psychologically important one for market participants.

Japan’s central bank said it would hold emergency bond-buying operations, offering to buy some $667 million in government debt, a move aimed at putting a floor under bond prices.

The yen has depreciated by about 23% so far this year, making it the weakest major currency in Asia.

Asian stocks headed down on Thursday, taking a cue from rising yields and cutting short a brief rally that was triggered by strong earnings reports by U.S. and European companies.

Even the Federal Reserve’s comments saying inflation pressures are easing failed to lift equities.

Economists at ING said: “The market has been looking for hints of a Fed pivot for weeks, but now that they are here, they seem to be ignoring them.”

“This sets up the day for a possible ‘lightbulb moment’, followed by strong gains in equities, and falls in front-end bond yields and the U.S. dollar.”

Japan’s history of supporting yen

British pound whipped around by Trussonomics

Key developments that could influence markets on Thursday:

Economic data: Euro zone Aug current account

European earnings: Ericcson, ABB, Akzo Nobel (OTC:), Nordea and

Volvo

US Oct Philly Fed index, Sep existing homes

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