The Jeremy Hunt effect is also visible on Wall Street which, like the markets of the rest of the world, was watching with concern the alerts on financial stability in the United Kingdom.
In fact, the last three weeks of the markets have seen the problems made in the UK as protagonists, born with the decision of the government of Liz Truss to launch a maxi tax cut plan. Such massive cuts have led investors to question the sustainability of the UK’s debt once taxes are cut.
The Truss government was thus forced to make an embarrassing turnaround, to sack Chancellor of the Exchequer Kwasi Kwarteng, replacing him with Jeremy Hunt.
Hunt immediately reassured the markets today and, in his first speech as the new UK finance minister, announced the withdrawal of almost all of the previously announced tax cuts by Kwarteng.
The reaction of the markets was positive, immediately rewarding the pound sterling and the British government bonds (Gilt). Overall, equity sentiment has improved.
Wall Street is once again pointing upwards, with the Dow Jones rising by more than 500 points, after the losses suffered last week when, particularly in the session on Thursday 13 October, the US stock market first suffered a historic thud. to then score an equally impressive comeback, in the same session.
The sell off on Wall Street was triggered by the publication of the US inflation data measured by the consumer price index, which highlighted the acceleration of core inflation in September.
In the same session as the crash, the comeback of the indices was surprising: just think that, during the session, the S&P 500 index had fluctuated within the broadest trading range since March 2020, while the Dow Jones was bouncing 1,300. points from the intraday lows tested in the previous hours.
The protagonist, after the release of the data, is the fear of a Fed forced to be, in response to stubborn inflation, also obstinate to defeat the scourge of the price boom.
The next meeting of the FOMC, the Fed’s monetary policy arm, is scheduled for November 1-2 and the announcement of a new 75-point squeeze is largely discounted.
For Wall Street, last week’s balance was negative, with the S&P 500 index dropping 1.6% on a weekly basis.
Today, to reassure equities, it is also the turnaround in US Treasury rates: 10-year rates fall to 3.945%, after having crossed the 4% threshold several times over the last week. The two-year Treasury rates also fell, the ones most sensitive to monetary policy decisions, which travel around 4.409%, down by 10 basis points, after having exceeded the 4.5% threshold last week. first time since 2007.
At about 4 pm Italian time, the Dow Jones jumped by almost 500 points (+ 1.67%), to 30,128.85 points; the S&P 500 rose 2.49% to 3,670.71 and the Nasdaq Composite rose more than 3.1% to 10,650.
The focus remains on US banks, after the roundup of accounts relating to the third quarter, which were baked last Friday by the giants of the caliber of JP Morgan, Morgan Stanley, Wells Fargo and Citigroup.
In general, US banks reported solid results, with the exception of Morgan Stanley, whose quarterly report was disappointing.
Today, before the start of the trading day, the other US giant Bank of America released the quarterly accounts. The giant said it ended the third quarter of the year with earnings down 8% to $ 7.1 billion, or 81 cents per share, due to the $ 898 million provisions it had to make to protect itself from any future losses on the loans granted. However, the eps beat expectations by 77 cents per share. Revenue was also better than estimated, standing at $ 24.61 billion on an adjusted basis, compared to the $ 23.57 billion forecast by the consensus. The stock rallies above + 5%.
JP Morgan earns more than 3%, Morgan Stanley rises 2%, Citigroup is flat, Wells Fargo + 2.6%.
The results of the US banks last Friday revealed the double effect on the balance sheets of the monetary tightening signed by Jerome Powell & Co.
On the one hand, banks have seen an improvement in profitability, confirmed by substantial increases in net interest income. On the other hand, the fear of a recession and therefore of the greater difficulty of households and businesses in honoring the repayment of the loans received, has resulted in an increase in provisions, to cope with the risk of an increase in non-performing loans-NPLs.
Tomorrow it will be the turn of Goldman Sachs (+ 1.8%), which will publish its quarterly.
Netflix (+ 5.4%), Tesla (+ 5.5%) and IBM (+ 1.8%), as well as Johnson & Johnson (+ 0.87%) will spread the accounts in the coming days of the week. , United Airlines (+ 0.80%), AT&T (+ 0.90%), Verizon (+ 0.85%), and Procter & Gamble (+ 1.6%), among many others.