Sterling crisis: markets brace for more volatility with Kwarteng to meet bank bosses – business live

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Kwasi Kwarteng faces a fraught meeting of City bosses today at the Treasury, following the horrific market reaction to his tax-cutting mini-budget.

Kwarteng and new City minister Andrew Griffith are due to welcome senior leaders from banks, insurance companies and asset managers today, Bloomberg reports.

The aim of the meeting was originally to come up with some bold ideas for the government’s so-called “Big Bang 2” plans to re-energise the City.

But the slump in the pound, and the brutal selloff in gilts, mean it will be more of a crisis summit than a convivial conversation. Kwarteng will not be able to get away with dismissing the sterling crisis as mere market gyrations.

Bloomberg explains:

Bankers were meant to be wowed by measures such as the end of a cap on their bonuses and the scrapping of the 45% top tax rate, and the early reaction from industry bodies was positive on Friday.

But Monday’s markets meltdown, which sent the UK’s borrowing costs soaring, killed off those good vibes.

Kwarteng will need to demonstrate that he understands the seriousness of the dramatic drop in the pound and gilts rather than characterizing them as short-term fluctuations, several financiers said. Attendees will want answers on how he can restore investor confidence.

Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.

Investors are bracing for another day of sterling volatility, as the crisis created by the government’s reckless mini-budget continues to grip the markets.

The pound is slightly higher in early trading, clinging onto the $1.08 mark, after hitting an alltime low around $1.035 yesterday morning. It’s still down 7% this month.

And the pound still looks extremely vulnerable, as the Treasury and the Bank of England struggle to prevent a full-scale loss of financial market confidence.

UK government bonds are on track for their worst month on record, going back to the 1950s, as international faith in Britain is hammered by Kwasi Kwarteng’s binge of borrowing to fund tax cuts, mainly benefiting the wealthy.

The selloff has pushed the cost of borrowing for 10 years up to 4.1%, from 3.1% before the mini-budget.

Jim Reid, strategist at Deutsche Bank, says:

UK assets have remained at the eye of the storm as the negative reaction to the government’s mini-budget on Friday continued.

The country’s government bonds were completely routed for a second day.

The staggering slump in gilt prices in recent days has forced several mortgage providers, including Virgin Money and Skipton Building Society, to pull deals, with economists predicting that interest rates could rise to 6% by next summer.

That would leave many households facing massive increases in mortgage repayments, which will be impossible for some to meet.

Yesterday, the Bank of England resisted pressure to implement an immediate emergency rise in interest rates, which put fresh selling of the pound.

The pound’s calamitous slide to record lows has gripped global markets too, and even increased the risk of a global recession.

And Labour leader Sir Keir Starmer is expected to depict Labour as the party of “sound money” and fiscal responsibility at his keynote speech to the Labour conference in Liverpool.

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