Markets cheer UK PM Liz Truss’s resignation

The news shaping the markets today

The White House accused Iran of training Russia’s military forces on Iranian-made drones used in the attacks against Ukraine. The safe-haven US dollar index traded higher amid the ongoing geopolitical tensions.

Argentina’s central bank held its Leliq interest rate at 75% at its latest meeting, exerting some pressure on the ARS/USD forex pair.

Japan’s annual inflation rate came in unchanged at 3.0% in September, from around an 8-year high in August, which sent the JPY/USD pair lower in forex trading this morning.

UK’s GfK consumer confidence indicator improved slightly to – 47 in October, versus a record low of -49 in September. Despite this, the GBP/USD forex pair remained under pressure.

South Korea’s producer prices accelerated by 8.0% year-over-year in September, versus an 8.2% increase in the prior month, sending the KRW/USD pair lower in forex trading this morning.

What’s happening: UK’s Prime Minister Liz Truss resigned on Thursday, after a tenure of only six weeks.

What happened: London stocks ended a volatile session with gains, after the UK PM announced her resignation.

The European equity markets and the sterling also made some recovery after the news.

Why it matters: Markets had been in turmoil since Chancellor Kwasi Kwarteng announced the new government’s mini-budget, which included a capping on energy prices as well as massive tax cuts. The fiscal plan received a lot of criticism from experts and economists worldwide, as the proposed tax cuts of around £45 billion were largely unfunded.

The budget was part of Liz Truss’s campaign that propelled her victory and sealed her entry into 10 Downing Street. However, the details of the budget did not go down well with either experts or investors.

Liz Truss forced Kwasi Kwarteng’s exit and appointed Jeremy Hunt as the new finance minister. Hunt announced a complete U-turn in the fiscal plan. The extent of change in the plan triggered market disruption and prompted an intervention by the Bank of England. This finally led the Conservative Party lawmakers to pressure their leader to step down.

Markets gained after Liz Truss announced her exit from 10 Downing Street in a press conference shortly after 0130 GMT.

Investors also remained concerned about interest rate hikes after the country reported higher-than-expected data on consumer prices on Wednesday. UK’s inflation rate climbed to 10.1% in September, from 9.9% in the previous month, with the core rate accelerating to 6.5%, from 6.3%.

The blue-chip FTSE 100 gained as much as 0.4% but settled higher by 0.27% at 6,943.91 on Thursday. The FTSE 250, which has greater exposure to the domestic economy, climbed 0.82% to close at 17,388.93. The GBP/USD forex pair rose around 0.2% to settle at $1.1239.

What to watch: Markets will keep an eye on the Conservative Party naming its next leader, which it must do before October 28.

Traders await the release of data on retail sales and public sector net borrowing from the UK today. Retail sales declined by 1.6% in August and are expected to decline further by 0.3% in September.

The markets today

US stocks will remain in focus today amid the ongoing earnings season

Context: Shares of AT&T gained on Thursday after the company reported financial results for its third quarter.

Details: AT&T is the first wireless carrier to report earnings in this earnings season. The telecommunications giant had recently announced the sale of its media business in a bid to focus completely on expanding its 5G wireless and fibre broadband services.

The Dallas, Texas-based company reported upbeat results for the third quarter, with an increase in wireless subscribers.

• Operating revenues declined by 4.1% year-on-year to $30.00 billion, but still exceeded the consensus estimates of $29.86 billion.
• Adjusted earnings contracted by 3% to 68 cents per share, beating the Street expectations of 61 cents per share.
• The company added 708,000 post-paid wireless subscribers during the quarter, versus the consensus estimates of 530,000. It also added 338,000 new fibre internet customers.

Soaring inflation forced AT&T to increase the prices of some of its plans but its free cash flows of $3.8 billion still fell short of market expectations of $4.28 billion.

Management guided to adjusted profits of $2.50 per share or higher for the full year, up from its prior estimates of $2.42-$2.46 per share.

How shares responded: AT&T’s shares climbed as much as 10% on Thursday to record their biggest intraday rise since March 2020. The stock has lost around 13% year to date.

What to watch: Investors will keep an eye on the results from other wireless carriers, as the wireless leader in the US, Verizon Communications, is all set to announce earnings on Friday.

Other Markets: EU indices closed higher on Thursday, with the DAX 30, CAC 40, Ibex 35 and Stoxx 600 up by 0.20%, 0.76%, 0.80% and 0.26%, respectively.

Support & resistances for today

Market snapshot

What else to watch today

Turkey’s consumer confidence indicator, Mexico’s retail sales, India’s foreign exchange reserves, value of loans and value of deposits, Canada’s retail sales, new home prices, manufacturing sales and wholesale sales, Eurozone’s consumer confidence indicator, US government budget statement and Baker Hughes crude oil rigs, as well as Indonesia’s foreign direct investment.