Saturday Oct 26 2024 18:12
3 min
Keir Starmer thinks owners of share owners don’t count as ‘working people’. Just give up and go home now; the revolution is going to be televised next Wednesday. No wonder we are so poor relative to our US cousins. Maggie was all about aspiration and helping people own property, including shares. Labour is the same old Labour:
" You can stay poor, but we will make you even more dependent on us, the benevolent state.”
Chancellor Rachel Reeves confirmed she will change the UK’s fiscal rules in her budget next week as she seeks to fund £20bn a year of extra investment. Gilt yields pushed up but didn’t want to get out of control; the 10yr this morning at around 4.22%, having pushed up 4.275% yesterday. JPM worry that shifting to gauging fiscal headroom using public sector net financial liabilities "could, in theory, allow almost limitless spending if done under the guise of the National Wealth Fund"
In an FT interview, Reeves suggested “five years is obviously the maximum”’ for balancing the budget. The market kinda thought (rightly?) this implied unbalanced budgets and a loosening of any kind of fiscal restraint that the bond vigilantes would notice.
Previous Treasury modelling suggested that an increase in 1% of GDP borrowing might increase interest rates by between 50 and 125 basis points, depending on economic conditions. An extra £50 billion of borrowing in 2028–29 (roughly the amount of extra ‘headroom’ provided by a switch to PSNFL) would amount to around 1.6% of GDP. More borrowing would produce an effect on the gilt market – the question is how much. Labour has spent a lot of time and political capital to buy some grace from the financial markets – we will see if this has paid off.
European stocks were broadly lower on Friday. The S&P 500 rose yesterday as Tesla bounced 22%, but the Dow Jones fell for a fourth straight day.
UK consumer confidence has fallen again according to GfK’s measure, -21 vs -20 last time.
The IMF says China’s fiscal measures to support its economy fall short of what is needed to address deflationary risks. Full QE or bust.
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