Chancellor’s economic U-turn brings ‘relief to stressed financial markets’

London’s top stock exchange, the pound, and Government bonds have all rallied on the day the Chancellor reversed the majority of his predecessor’s key fiscal policies in one sitting.

Markets were buoyed by Jeremy Hunt’s emergency statement in which he ripped up tax-cutting plans to shed billions off the UK Government’s debt book.

The FTSE 100 jumped up by 1.57% at one point on Monday afternoon and closed firmly in the green, boosted by gains across utilities and housebuilders.

The FTSE 100 closed 61.45 points higher, or 0.9%, at 6,920.24.

The interest on Government bonds – known as gilt yields – declined sharply following the Chancellor’s statement, indicating that investors were soothed by Mr Hunt’s reversal of major debt-funded tax cuts that had been announced in September’s mini-budget.

But long-dated gilt yields still have a way to go before they drop to the levels seen before former chancellor Kwasi Kwarteng’s mini-budget.

Sterling also saw a welcome rebound, jumping more than 2.2% against the US dollar in the afternoon.

It was up 2.2% to 1.145 dollars when markets closed, and 0.9% higher at 1.1601 against the euro.

Russ Mould, investment director at AJ Bell, said: “A drop in the benchmark 10-year gilt, or government bond, yield will be welcomed with a sigh of relief in Downing Street, the City and the households of the UK, as this could bring some relief to stressed financial markets, pension fund managers and those who are worrying about the mortgage bills.

“The yield on two-year and 30-year government debt is also falling today.

“However, the yield on all three is still above where it was before former chancellor Kwasi Kwarteng launched his fiscal event on September 23, so markets will still be looking for some clear, well-costed tax and spending plans, as well as the Office for Budget Responsibility’s independent verdict on October 31.”

Other top markets in Europe started the week on a positive note and closed firmly in the green. The German Dax was up by 1.7% and the French Cac closed 1.83% higher.

Across the pond, Wall Street stock markets were making sharp gains when European markets closed, boosted by a stronger-than-expected set of financial results from the Bank of America. The S&P jumped 2.6% and Dow Jones was up 1.76% when European markets closed.

In company news, online mattress retailer Eve Sleep said it has called in administrators after a failed sale process.

Its shares were suspended on the London Stock Exchange and it said that it “is not expected” there will be “any return to the shareholders of Eve” after hiring insolvency specialists.

Meanwhile, online retailer Made.com said it has received a raft of takeover proposals after it put itself up for sale last month.

The company has been hit by a slump in consumer spending and supply chain disruption that has taken a bite out of its costs.

Shares in Made jumped by more than 10% on Monday.

Fashion retail giant Asos saw its shares slump after confirming that it is in talks with lenders over changing the terms of a £350 million borrowing facility, telling shareholders that it was close to reaching an agreement.

Its share price was down 2.5% when markets closed.

The biggest risers on the FTSE 100 were British Land, up 17.3p to 350.8p, Persimmon, up 58.5p to 1,269.5p, Land Securities Group, up 24.2p to 531.2p, International Consolidated Airlines Group, up 5.18p to 115.04p, and United Utilities Group, up 37.4p to 891.8p.

The biggest fallers on the FTSE 100 were Hargreaves Lansdown, down 15.8p to 796.6p, Haleon, down 4.7p to 269.1p, BP, down 5.6p to 449.45p, Pearson, down 10.4p to 889.6p, Coca-Cola, down 16.5p to 1,971p, and Halma, down 15p to 2,028p.