Eurozone facing 'severe risks' to financial stability, admits ECB
The FTSE 100 closed down 1.77pc at 6,881.59
The Dow Jones closed down 1.54pc at 29,225.61
Ben Marlow: There is a ticking timebomb under the financial system
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The pound's rally early this morning saw it briefly erase all of its precipitous losses from last week following the announcement of the new government's mini-Budget.
Sterling has gained more than 7pc from its all-time low of $1.0327 at the start of the week. In early Asian trade today it was sitting at $1.1168 - about the same level it was at before Kwasi Kwarteng began his speech last Friday, announcing the UK's sweeping tax cuts. However, at around 4am it dropped down to $1.1092.
According to strategists, the Bank of England's bond purchases and the stabilisation of gilts yields were a big factor in soothing investor fears.
Liz Truss and finance minister Kwasi Kwarteng will today meet the head of the country's independent fiscal watchdog, the Office for Budget Responsibility (OBR), to discuss the budget forecast process.
Ms Truss and Mr Kwarteng have both insisted they will not ditch any element of their tax-slashing announcement.
Sterling recovers with euro as UK fiscal angst recedes
Sterling and the euro rose to fresh one-week highs on Friday, buoyed by the Bank of England's moves to calm markets and hawkish signals from the European Central Bank.
The British currency was headed for its best week against the U.S. dollar in 2 1/2 years as the BoE waded into the debt market to buy gilts for a second day on Thursday, buoying UK yields.
Heated German and Dutch consumer inflation data also served as a reminder that the job of the ECB, BoE and other central banks is not done, with the figure for the wider 19-country euro zone due later on Friday.
The pound touched $1.1222 early in the Asian session, taking it very close to erasing all of the precipitous losses in the aftermath of the new government's so-called mini budget last Friday.
Benefits hit as Liz Truss tries to stem the mini-Budget bleeding
Benefits payments are set to fall in real terms under government plans to reassure the City that it will control spending.
Efforts to calm the markets in the wake of the mini-Budget came as a new poll showed Labour had a 33-point lead over the Conservatives - believed to be the biggest for any party since the late 1990s.
On Thursday, Liz Truss and Kwasi Kwarteng used interviews to insist they would not ditch any element of their tax-slashing announcements, made last Friday, after a week in which the pound fell to record lows and interest rates soared.
Instead, they made it clear that a squeeze on government departments was coming, with public spending remaining at levels agreed last year despite inflation eating into those budgets.
Read our front page story by Ben Riley-Smith and Nick Gutteridge here
Pound has 'stronger yield support', says Australian strategist
The pound has a "much stronger yield support now", a strategist from Sydney has said overnight, as the sterling rallied this morning.
"It's a reminder that currencies are driven by a myriad of factors - it's clearly not due to any improvement in the outlook for the UK," said Sean Callow, strategist at Westpac Banking Corp.
"The pound does at least have much stronger yield support now. Loose fiscal policy is often supportive for currencies to the extent that it can force tighter monetary policy."
Tory rebels threaten to block scrapping of 45p tax rate
Tory MPs are threatening to block the abolition of the 45p tax rate as Liz Truss faces a rebellion over the mini-Budget.
Some Conservative backbenchers are furious about the measure, arguing that it is "toxic" and has come at "a high political cost for very little benefit".
MPs have told how they are getting "shouted at in the street" about the tax cut for top earners while their inboxes are flooded with correspondence from constituents angry about the move.
Rebel Tories are preparing to vote down sections of the Finance Bill to block the abolition of the 45p rate by supporting amendments that would see it struck out, The Telegraph understands.
Read the full story here
Pound back to where it was before mini-Budget shock
The pound is recovering as its rally early on Friday saw it briefly wipe out all of the losses it made since Kwasi Kwarteng began his speech last Friday.
It comes as the new government made efforts to calm the markets yesterday, after the mini-Budget sparked turmoil.
Liz Truss and Chancellor Kwasi Kwarteng will today meet the chairman of the Office for Budget Responsibility's (OBR) to discuss the fallout following last Friday's partial budget.
5 things to start your day
1) Eurozone facing 'severe risks' to financial stability, admits ECB The institution told the region's banks to prepare for financial turmoil caused by huge falls in investments and potential disaster in the house market
2) UK net exporter of electricity to Europe for first time in decade Eight percent of the electricity generated in Britain in the three months to June 2022 was sent to other European countries through undersea power cables
3) HSBC considers leaving iconic Canary Wharf HQ as more bankers work from home The bank, one of Britain's largest employers, is reviewing whether to keep its towering London skyscraper or move to a new base
4) 60pc of people risk not having enough in their pension pots when they retire, MPs warn A report from the Work and Pensions Committee said urgent action was needed to help address the shortfall in savings
5) Britain launches urgent security review of North Sea energy pipelines after Russian 'sabotage' The energy industry is discussing with Government officials how to protect its oil and gas rigs and pipelines following the underwater explosions
What happened overnight
Asian shares on Friday were headed for the worst month since the onset of the COVID-19 pandemic, while jitters in currency and bond markets persisted over hawkish talk from central banks, worries about global recession and rising geopolitical risk.
MSCI's broadest index of Asia-Pacific shares outside Japan was largely flat on Friday, as a bounce in Hong Kong and among mainland Chinese bluechips offset declines elsewhere. Japan's Nikkei fell 1.6pc.
The Asian index was set to record a staggering 12.5pc drop for the month, the largest since March 2020 when the COVID-19 pandemic threw financial markets into chaos.
Coming up today
Economics: Gross domestic product (UK), Nationwide house price index (UK), mortgage approvals (UK), consumer credit (UK), unemployment rate (EU), personal spending (US)
Corporate: Cineworld, Dignity, Dp Eurasia (interims); Pennon (trading update)