Current Affairs effect on the market

Today Xi and Putin have a side meeting at the summit of the Shanghai Cooperation Organisation in Uzbekistan - regarded by many as China’s answer to NATO.

Russian foreign spokesman referred to the SCO a few days ago as “standing for a just world order”.

Expansion of the SCO continues with Iran next in line to join.

There will likely be various anti-western statements but not likely that these will impact market prices - except should there be a huge economic policy shift.


My only Fear:

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Yeah, we all have our fears.

Here in UK the market is acutely aware of the new Government’s stated intention of capping household energy bills.

Bottom line is that the Govt will underpin any difference between energy wholesale price to energy co.s and the capped retail price to households - thus guaranteeing energy co.s profits.

Big problem is that it is impossible to put a number on future wholesale price whereas retail price will be set in stone.

The UK Govt does not have the money to fund this (limitless) bill so they have to borrow - second problem is that borrowing costs are on the up - 80% increase on same qtr as last year to be exact.

IN UK the Treasury is not dissimilar to a Central Bank in that they act in the Nation’s interest governed by civil servants and not politicians.

First act by the new Govt was to fire the head of the Treasury on Sep 8th without any stated reason - assumption is that he was not in agreement with the huge increase in borrowing.

Edit: Bloomberg reported yesterday:
Pound Hits Lowest Since 1985Latest hit to currency is slide in UK retail sales data


My home country imports wheat from Russia if Ukraine and Russia really got cocky wheat prices will go Brrrrr. Any Ideas?

From a UK perspective prices index in general are at a 40 yr high - that said fuel costs took a small decline - but in context of your post food prices continue to rise.

New PM, Liz Truss is en-route to the US and will meet with Pres Biden.

She has told reporters aboard the plane that there is no hope in the medium term for a US/UK trade deal.

That may or may not be the case.

For GBP players this Thursday sees the BOE make a few announcements so need to watch that.
Then on Friday the Fin Minister announces his ‘mini budget’. Usually these are well telegraphed - cut in Corp Tax, cut in Nat Insurance (a health tax) possible cut in Personal Tax, spending plans re energy.

Not likely to have a huge, short-term impact on GBP - unlike Thursday’s potential.

Friday’s news has the potential for longer term direction.


This is all fair enough, thanks for the round-up. I hope the budget is seriously pro-growth, not just cosmetic.

Meantime there’s more possibility for market action from the Fed and BoJ. The Fed could go for a bigger than expected interest rate rise. The BoJ could actually do something: a surprise bumper US rate rise could be the catalyst: it could be a major shock if the BoJ even raised the Japanese interest rate by 0.1%.

GBP is the strongest today - sometimes I’ve noticed a move before BOE and then it’s faded on the actual release.

The WP and others reckon 0.75 for the Fed - will they also signal lots more down the line?

Big week ahead.

I suspect the way the Fed play these games is keep fairly quiet on a 0.75% rise but signal dramatic future rises on a 1.0% rise.
Always interesting to try and second-guess these slippery guys.


Faded before the day’s end.

Russia’s Putin has made a pre-recorded speech which was apparently scheduled for airing this evening but has mysteriously been postponed until tomorrow morning.

If the rumours prove correct and that there is a general mobilization or even a limited one then that will be an escalation of the war in Ukraine.

We will know in the morning.

I heard someone military saying that if Putin starts to all up conscripts from the major Russian cities rather than the provincial farms he will lose support from the Russian majority as their sons report direct to their families how badly things are going in Ukraine and some fail to get home ever again. In any case, it takes too long to train up new recruits today.

They reckoned mobilisation will never happen - Putin might win the war but would definitely lose the presidency.

Putin has announced a ‘limited’ mobilization - some 300,000 - all ex military.

Has had an immediate effect on Euro - dropped over 60 pips.

Why Euro? - in Putin’s comments he referred to ‘prevailing winds’ which has sinister undertones for Europe.

Stock markets reaction has been fairly muted (thus far) - except Russia’s yesterday which fell considerably - the announcement was pre-recorded so likely some leakage.

Why didn’t markets “price in” Putin’s latest move? - the detail, especially the threats to Europe were not clear.

Edit: forgot to mention oil rose to over the 86 level on the news.

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He is spinning the story of defending Russians under the yoke of nazism - apparently a majority of Russian people believe this to be true.

In Russia schools/media have been told not to use the term ‘war’ but rather special military operation - that narrative will become increasingly difficult.


I didn’t know Putin is that much skilled propagandist.

There you go - the mini budget had no surprises, the surprise is that the market, even though the tax cuts and extra spending were well telegraphed, has reacted much more negatively than expected - seems like a month’s move in a day.

It’s the increase in borrowing and the rise in the cost of same that’s rattling investors - they are not convinced that the numbers stack up.

In my humble opinion it’s too early to tell - I don’t think sacking the head of the Treasury was a good idea from a pound price pov - investors like continuity and stability.

I wonder if the PM and her team just conclude they’ve got nothing to lose. If they don’t make an immediate and noticeable impact they’ll be out in 2024 anyway. So might as well go all in on Conservative fiscal principles. At least that way they keep their own voters onside.

I too was surprised the GBP fell so heavily.

However, the consolation is that 22 of the 28 pairs are probably going to close in line with their respective prevailing D1 trends.

Plus also I have been short GBP/USD for over 2 weeks…

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I like the short - not a political statement but most guys have been wary of the Truss economics.

Problem is that Conservatives coined the phrase ‘balance the books’ back in M. Thatcher’s days - it was always Labour who liked to borrow and spend taxpayers’ money - this Government is doing both things - borrowing more yet cutting taxes.

Your comment up above is very apt where you hoped that new policy would stimulate growth - this is key.

In business we sometimes take a gamble and borrow in order to grow - I know the Chancellor would disagree with the wording but hopefully it will work.

One other thing - re the US Trade Deal that was promised but that we didn’t get.

I suspect that before the next election there is an increased chance that such a deal will materialize - involves EU/Ireland/US/UK - but more on that later.

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Today the BOE made and announcement of longer term UK Bond buying - they have been due of off load their existing stock but the ‘mini budget’ has changed the dynamic.

It’s an unusual scenario whereby the CB has to act to ‘calm the market’ as a result of it’s own Govt economic policy - most often such action is caused by external source.

GBP initially reacted by jumping up to 1.0820 - but has since fallen back as the news is digested more fully.

Tomorrow apparently the PM and Chancellor will meet with the OBR - also unusual - seen as a further attempt to ‘calm the market’

The OBR confirmed today that they were not asked for a forecast pre the mini budget.

The OBR will give the Govt a complete forecast next week.

The meet with the OBR is a positive step and with the power of hindsight perhaps an earlier meet would have gone a long way to avert the recent turmoil.