Wall Street opens sharply higher; UK tax retirement is welcomed

NEW YORK (AP) — Stocks are opening sharply higher on Wall Street, the latest about-face in a market that has seen many sudden highs and lows recently. The S&P 500 jumped 2.5% early Monday, while the Dow Jones rose 2% and the Nasdaq 3%. Benchmark Treasury yields fell somewhat from their multi-year highs, while in the UK government bonds rallied after the news that the country’s new Treasury chief was giving up nearly all of a series of unfunded tax cuts announced last month that shook markets. Bank of America rebounded nearly 5% after reporting better-than-expected earnings.

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U.S. markets were heading higher early Monday ahead of another round of corporate earnings that are released amid erratic market swings.

S&P futures rose 1.2% and Dow Jones Industrials rose 1% ahead of the opening bell.

Bank of America’s profits fell 8% in the third quarter as it set aside cash to cover potential loan losses. It is the latest bank to start saving money for a possible recession, as Wall Street’s biggest banks have grown increasingly gloomy about the US economy as winter approaches.

Charles Schwab and Bank of New York Mellon also announced their results on Monday. On Friday, strong bank earnings briefly supported markets even as executives said they were setting aside more funds in the event of a recession.

In Europe, UK Treasury chief Jeremy Hunt on Monday canceled most of an economic package announced by the government just weeks ago, including a planned income tax cut.

In a bid to ease financial market turmoil, Hunt said he was scrapping “virtually all” of the tax cuts announced last month and signaled that government spending cuts were underway. It also reduced the ceiling on energy prices intended to help households pay their bills. It will now be reviewed in April instead of lasting two years.

Hunt was appointed on Friday after Prime Minister Liz Truss sacked Kwasi Kwarteng, who spent less than six weeks as Treasurer.

Markets have been choppy and swung sharply last week after a US report showed inflation remained very high.

On Monday, Britain’s FTSE 100 rose 0.9%, as did France’s CAC 40. The German DAX was up 1.2% at midday.

In Asia, the meeting of the ruling Chinese Communist Party opened on Sunday and is expected to renew Xi Jinping as leader for the next five years. Analysts expect the meeting to reaffirm Xi’s grip on power and stronger state control over the economy. They do not expect any change from Beijing’s “zero-COVID policy”.

“New updates from the Chinese Party Congress are being scrutinized, with a focus on technological advancement and national security appearing to be seen as high priorities for China’s long-term direction. Further decoupling of American technology seems to be history,” said Yeap Jun Rong, market strategist at IG in Singapore, in a comment.

Japan’s benchmark Nikkei 225 slipped 1.2% to end at 26,775.79. Australia’s S&P/ASX 200 fell 1.4% to 6,664.40. The South Korean Kospi rebounded to gain 0.3% to 2,219.71. Hong Kong’s Hang Seng rose 0.5% to 16,662.19, while the Shanghai Composite rose 0.4% to 3,084.94. In Bombay, the Sensex gained 0.8%.

In currency trading, the US dollar fell from 148.63 yen to 148.87 Japanese yen. This is a nearly 32-year low for the yen against the dollar.

Clifford Bennett, chief economist at ACY Securities, noted that the US dollar will likely continue to rise as interest rates rise to counter inflation. This is a challenge for countries facing steep increases in import costs and debt repayments.

“The outlook is bleak. The economic horizon is bleak,” he said of the US economy. “The US dollar will continue to strengthen for the time being, especially against other Western currencies.”

The euro cost 97.32 cents, down from 97.21 cents.

Inflation concerns remain, although there are signs of slowing economies in some parts of the world. A report released last week showing U.S. consumer expectations for inflation was another signal that the Federal Reserve could continue to aggressively raise interest rates, although this strategy raises recession risks.

The Fed has already raised its benchmark interest rate five times this year, the last three increases by three-quarters of a percentage point. Wall Street expects another three-quarters percentage point increase at its next meeting in November.

In energy trading, benchmark U.S. crude fell 7 cents to $85.54 a barrel in electronic trading on the New York Mercantile Exchange. US crude oil prices fell 3.9% on Friday. Brent crude, the international standard, added 15 cents to $91.78 a barrel.

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Kageyama reported from Tokyo; Ott reported from Washington.