Wall Street opens higher; pound rallies after UK tax retreat

NEW YORK (AP) — Stocks open higher on Wall Street as Treasury yields ease their multi-year highs. The S&P 500 rose 0.9% in Monday morning trading. The pound strengthened and borrowing costs for the UK government fell after the beleaguered new government of Prime Minister Liz Truss scrapped plans to cut income tax rates for high earners, in part of a package of unfunded cuts that had sparked turmoil in financial markets and sent the pound to record highs. Crude oil prices were significantly higher ahead of an OPEC+ meeting this week. The oil cartel is expected to accept production cuts.

THIS IS A BREAKING NEWS UPDATE. AP’s previous story follows below.

U.S. futures rose slightly on Monday morning as markets open the month trying to shake off a miserable September marred by fears that the Federal Reserve’s aggressive interest rate hikes could plunge the U.S. economy into a tailspin. a recession.

Dow Jones Industrials futures rose 0.8% and S&P 500 futures gained 0.7%.

September saw the S&P 500 fall to its worst month since the coronavirus pandemic sent global markets tumbling. It enters October at its lowest level since November 2020 and is down more than a quarter since the start of the year.

The Fed has been at the forefront of the global campaign to slow economic growth and hurt labor markets just enough to reduce inflation, but not enough to cause a recession. On Friday, the Fed’s preferred measure of inflation showed that it was worse last month than economists had expected. This should allow the Fed to keep rates rising and keep them high for some time, increasing the risk that it will go too far and cause a slowdown.

Stocks fell in Europe and Asia on Monday as oil prices jumped more than $3 a barrel amid dire warnings of energy shortages in Europe if Russia cut gas supplies.

The German DAX fell 0.1%, while the CAC 40 in Paris lost 0.4%. Britain’s FTSE 100 lost 0.4%. All were down even earlier but recouped some of those losses by midday.

The UK government on Monday scrapped plans to cut income tax for high earners, part of an unfunded package of cuts unveiled just days ago that has sparked turmoil in financial markets and sent the pound to record highs.

In a dramatic about-face, Treasury chief Kwasi Kwarteng has scrapped plans to scrap the top 45% income tax rate paid on earnings above 150,000 pounds ($167,000) a year.

He and Prime Minister Liz Truss have spent the past 10 days defending the cut in the face of market chaos and growing concern from the ruling Conservative Party.

Also in Europe, the Paris-based International Energy Agency said in its quarterly gas report that people will need to save at least 13% over the winter if Russia cuts off the last gas trickle. which travels to Europe.

Europe faces ‘unprecedented risks’ to its natural gas supply this winter after Russia cut off most pipeline shipments and could find itself competing with Asia for already scarce and expensive liquid gas who arrives by boat, the IEA said.

Reports that major oil producers are planning further production cuts also put upward pressure on energy prices.

Benchmark U.S. crude oil gained $3.39 to $82.88 a barrel in electronic trading on the New York Mercantile Exchange. It lost $1.74 to $79.49 a barrel on Friday.

Brent crude, the standard for international oil pricing, rose $3.33 to $88.47 a barrel.

OPEC and allied oil-producing nations, including Russia, cut supplies to the global economy slightly a month ago, underscoring their displeasure as recession fears help drive down crude prices.

In Asian trading, Japan’s Nikkei 225 index gained 1.1% to 26,215.79 after a quarterly Bank of Japan survey showed manufacturing sentiment had darkened, reflecting rising costs , the weakening of the yen and the continued restrictions related to the pandemic.

“Today’s Tankan survey suggests that while the services sector is benefiting from the diminishing virus wave, the outlook for the manufacturing sector continues to deteriorate,” according to a report from Capital Economics. He noted that this was the third straight decline in sentiment for the world’s third-largest economy.

The BOJ has kept interest rates below zero in a longstanding effort to encourage inflation and contain deflation as the country ages and its population shrinks. This has kept the value of the yen low against the US dollar, which has strengthened as the Federal Reserve raises rates to combat decades-high inflation.

The dollar was trading at 144.90 yen early Monday, down from 144.68 yen late Friday. This raised speculation that the central bank could again intervene to prevent the yen from weakening further. The euro was at 97.59 cents, down from 97.96 cents.

The stunning and rapid rise of the US dollar against other currencies, meanwhile, increases the risk of creating so much stress that something will crack somewhere in the global markets.

Elsewhere in Asia, Hong Kong’s Hang Seng index fell 0.8% to 17,079.51. Australia’s S&P/ASX 200 slipped 0.3% to 6,456.90. Taiwan’s Taiex lost 0.9% and Bangkok’s SET fell 1.8%.

On Friday, the S&P 500 fell 1.5%, while the Dow Jones Industrial Average fell 1.7% and the Nasdaq composite 1.5%. All three were down nearly 3% last week as the Dow slid into what is considered bearish territory, down more than 20% for the year.

——

Kurtenbach reported from Bangkok; Ott from Washington.