Introduction: Markets subdued as traders and enterprise teams keep in mind the Queen
Good morning, and welcome to our rolling protection of enterprise, the monetary markets, and the world economic system.
The monetary markets are subdued on the primary day of nationwide mourning following the dying of Queen Elizabeth II.
Enterprise teams and Metropolis traders are remembering the Queen’s service over seven a long time, and her contribution to trendy Britain.
Tony Danker, CBI Director-Normal, spoke for the enterprise world final evening when he hailed her management and values:
“All through her unprecedented 70 years on the throne, HRH Queen Elizabeth II served the nation with distinction as a stalwart instance of British values of honour, dignity and resilience. She devoted her life to the individuals of the UK and the Commonwealth, offering compassionate and inspirational management in the course of the many difficult occasions of her lengthy reign.
“Occasions are laborious proper now – made extra so by the lack of our much-loved Queen – and our tribute must be to work tirelessly to construct a greater future for the individuals of this nation in reminiscence of Her Majesty.”
The New York Inventory Change and Nasdaq each noticed a second of silence yesterday to honour the queen.
The London Inventory Exchance has simply opened as standard – in contrast to in sport, the place occasions such because the third Check between England and South Africa and the PGA championship at Wentworth shall be paused for a minimum of a day.,
Underneath Operation London Bridge (the plan for the approaching days) the inventory market would shut on the day of Elizabeth II’s funeral.
However whereas the markets are open, the principle indices aren’t anticipated to be risky, with traders considering the Queen’s exceptional reign, and her work from home and overseas.
Invoice Blain, strategist at Shard Capital, says Queen Elizabeth was “instrumental in establishing and strengthening the UK’s gentle energy” and its place on the world stage.
It has been a rare reign by a rare queen – one in every of easy however unchallenged majesty. Admired and revered across the globe. Deeply cherished at dwelling.
For the following 10 days the UK shall be in mourning. Life will go on, however don’t anticipate enterprise as standard.
King Charles III is because of meet Liz Truss and tackle the nation:
The agenda
Right this moment: EU power ministers collect for emergency talks in Brussels on Friday talk about measures to counter the power disaster
Midday: OECD publishes its annual Employment Outlook report
5pm BST: Russian GDP and inflation report
Up to date at 04.54 EDT
Key occasions
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Key occasions (7)Elizabeth II (11)UK (9)Commonwealth (5)Financial institution of England (4)Liz Truss (3)
TUC Congress postponed
The TUC has postponed its annual Congress, following the dying of the Queen.
TUC Congress 2022 – the annual decision-making physique for the federation of trades unions – was as a consequence of start on Sunday at The Brighton Centre, however will now be rescheduled for a later date.
A TUC spokesperson stated:
“The Normal Council sends our condolences to the King and the Royal Household on the dying of the Queen, and recognises her a few years of devoted service to the nation.
“As a mark of respect, we now have determined to postpone Congress 2022 till later this autumn.”
We ship our condolences to the King and the Royal Household on the dying of HM the Queen.
As a mark of respect, we now have determined to postpone Congress 2022, which was as a consequence of start this Sunday, till later this autumn.
— Trades Union Congress (@The_TUC) September 9, 2022
Up to date at 07.08 EDT
UK power help scheme to go forward as deliberate – PM’s spokesman
Britain will go forward with plans to introduce an power worth assure from October 1st, Prime Minister Liz Truss’s spokesman has stated, regardless of the interval of nationwide mourning triggered by the dying of Queen Elizabeth.
The federal government will work with the speaker of the Home of Commons to introduce any laws wanted as soon as the mourning interval has completed, the spokesman added (by way of Reuters).
There is no such thing as a obligation on organisations to droop enterprise in the course of the Nationwide Mourning interval.
The Nationwide Mourning Steerage, revealed this morning, says:
Relying on the character and site of their enterprise and the tone of deliberate occasions, some companies might want to think about closing or suspending occasions, particularly on the day of the State Funeral, nonetheless that is on the discretion of particular person companies.
Public providers will proceed as standard, though there could also be some adjustments to service availability.
There’s a ‘sturdy likelihood’ that the pound might fall via parity towards the greenback or euro, or each, throughout King Charles’ reign, fears Package Juckes, foreign money knowledgeable at Société Générale.
Juckes says:
Neither is probably going this yr, however sterling’s post-GFC downtrend received’t finish till there’s a seismic change within the path of financial coverage and the economic system.
After Blair/Brown’s ‘Cool Britannia’ decade of three% development was allowed to get uncontrolled on the again of insufficient monetary regulation, GDP development has averaged a measly 1 ½%, and the present account deficit has averaged nearly 4% GDP.
The unhappy fact is that whereas Queen Elizabeth was nice, her current governments haven’t been.
Queen Elizabeth was “a beacon of stability and decency” all through her 70-year reign, says Mark Dowding, CIO of BlueBay Asset Administration.
Dowding advised purchasers:
It’s notable that expectations surrounding [prime minister Liz Truss are so low (not more than 10% of those polled expect her to be successful in the role), then there is little to lose, and it won’t take much to surprise to the upside. Truss is the 15th Prime Minister, who has been appointed by the Queen, the first being Winston Churchill.
Queen Elizabeth was a beacon of stability and decency throughout her 70-year reign as British monarch, even during difficult times for the country as a whole. We owe her an enormous debt of thanks. God bless her.
Dowding is also hopeful that the UK government’s energy price cap freeze, announced yesterday morning, will mean a lower inflation peak, and a shallower recession:
UK government plans to cap gas prices slightly above April price levels, have led to a substantial revision of UK inflation estimates. Instead of peaking at 18% next April, we now look for CPI to top out under 12% during Q1 2023.
Similarly, the trajectory for growth also looks more encouraging and the UK economy may get away with a mild, rather than a deep recession in the months ahead.
The cost will be huge, though, especially if gas prices don’t fall back.
If the war in Ukraine drags on and wholesale gas prices remain at current levels, then mooted additional support packages from Truss would total approximately £170bn (or 7.7% of GDP) over the next 18 months.
And even freezing typical bills at £2,500 per year will still be a massive strain for vulnerable households.
The Office for National Statistics has postponed all the publications scheduled for today until 9.30am on Monday morning, following the Queen’s death.
But next week’s scheduled publications will go ahead as advertised (unless further changes are announced).
That would include the latest UK GDP, unemployment, inflation and retail sales data –- all important information about the health of the UK economy at a crucial time, as it risks falling into recession.
For information purposes:@bankofengland will announce plans on bank notes after the period of mourning. No decision yet on next week’s MPC meeting@ONS suspends releases today. But will publish trade, GDP, labour market, inflation and retail sales data next week
— Chris Giles (@ChrisGiles_) September 9, 2022
The economic picture as King Charles III takes the throne has some similarities to the situation when his mother’s reign began in the 1950s, points out Professor Costas Milas, from the management school of University of Liverpool.
When King George VI died in February 1952, the UK economy recorded the following headline statistics (retrieved from the Bank of England’s millennium database): CPI inflation rate of 14.04%, unemployment rate of 1.8%, BoE base rate of 2.5% and 10-year government bond yield of 3.84%.
70 years later, we face (again) double-digit inflation, interest rates on the rise and heading towards their February 1952 levels and, at the same time, very low unemployment…
The Bank of England postponed an inflation attitudes survey it had planned to release today after the death of Queen Elizabeth II, a spokesperson said (via Bloomberg).
There was no comment about whether Bank’s next interest rate decision, scheduled for 15 September, will go ahead as planned.
The MPC is expected to raise interest rates at that meeting, probably by at least 50 basis points (half a percent).
Updated at 05.39 EDT
Last night the Bank of England reassured the public that current banknotes featuring the image of the Queen will continue to be legal tender.
Governor Andrew Bailey said:
“It was with profound sadness that I learned of the death of Her Majesty The Queen.
On behalf of everyone at the Bank I would like to pass on my deepest condolences to the Royal Family. For most of us, she is the only head of state we have ever known, and will be remembered as an inspirational figure for our country and the Commonwealth.”
The Bank’s building at Threadneedle Street will fly a flag at half-mast as a mark of respect.
Despite the sombre mood in the City, both the pound and the FTSE 100 index have pushed higher – as anxiety over the global economy and hawkish central banks eases.
Sterling and the euro have gained over a cent against the dollar – whose weakness today has pushed up stocks. One pound now buys $1.164, up from just over $1.14 at its 37-year low on Wednesday.
Mining companies are rallying, helped by the weaker dollar and lower-than-expected inflation data out of China overnight, lifting the FTSE 100 by 120 points or 1.6%.
Traditionally, a strong pound would pull the FTSE 100 lower (as it make exports less competitive and cuts the value of overseas earnings).
But that relationship seems to have changed, with UK assets moving more in sync, as Reuters’ Andy Bruce shows here:
Interesting in investor behaviour towards UK assets in the last few months.
Used to be the case that people that people would use a weak pound to pile into the FTSE. No more.
£ and FTSE now highly correlated – compare with, say, months after the Brexit vote 👇 pic.twitter.com/xg97p3hnpQ
— Andy Bruce (@BruceReuters) September 9, 2022
Similar with gilts – investors used to pounce on a weak pound to snap those up. But last couple of months have seen a positive correlation.
(change in gilt yield here inverted so it represents the price) pic.twitter.com/WGNiInUqF7
— Andy Bruce (@BruceReuters) September 9, 2022
Investor sentiment has soured towards UK assets recently, reflecting a few things including reliance on imported energy and questions over institutional competence.
— Andy Bruce (@BruceReuters) September 9, 2022
Updated at 04.58 EDT
Robert Booth
Changing the nation’s coins and bank notes, following the Queen’s death, will be a slow process, as my colleague Robert Booth explains:
There are 4.5bn sterling bank notes in circulation with the Queen’s face on them, worth a combined £80bn. Replacing them with alternatives featuring the head of the new monarch is likely to take at least two years.
When the latest synthetic £50 notes were issued, the process of recall and replacement took the Bank of England 16 months. When the Queen acceded to the throne in 1952, the monarch was not featured on the banknotes.
That changed in 1960 when the face of Elizabeth II began to appear on £1 notes in an image created by the banknote designer Robert Austin, which some criticised as too severe.
An image of the new monarch would be agreed with Buckingham Palace. The Queen’s head also features on some $20 banknotes in Canada, on coins in New Zealand, and on all coins and notes issued by the Eastern Caribbean central bank, as well as other parts of the Commonwealth.
Coin designs may be changed more slowly if historical precedent is followed: it was common to have different monarchs in your wallet as the changeover in coins happened organically rather than through recall.
