Another UK prime minister has resigned, and I’ve now lost count of how many Chancellors we’re going to be up to if Jeremy Hunt is also replaced next week.
Liz Truss’s position was hanging by a thread and has been since the mini-budget but it unravelled at a remarkable pace. And now, the UK is once again waiting to see who will be the next prime minister and how the process will be decided.
Truss has no doubt been an unmitigated disaster and I’m not sure who exactly will make the country feel at ease at this point. There will obviously be calls for a general election, but that won’t provide any certainty or leadership for the country in the midst of a crisis. It would appear there are only bad options on the table, so we probably shouldn’t expect a positive outcome.
Oh, and Boris Johnson is apparently entering the race.
Is Tesla On Right Track?
Despite Elon Musk’s best efforts to talk up Tesla's (NASDAQ:TSLA) performance and outlook, shares are trading 4% lower and almost 50% from their high almost 12 months ago. No doubt the company has weathered the storm of the last few years relatively well, but the global economic outlook has deteriorated significantly in that time, as Musk acknowledged, and the miss on revenue may be seen as a concern. Still, he remains very optimistic – to put it mildly – eyeing a path to the company being more valuable than Apple (NASDAQ:AAPL) and Saudi Aramco (TADAWUL:2222) combined. He never has been short of ambition.
China Mulls Easing COVID Quarantine As LPRs Left Unchanged
Asian markets appear to have been boosted in the middle of the session by reports that the leadership is debating a reduction to COVID quarantine for inbound travellers. While a very small tweak and still desperately lagging behind the rest of the world where zero restrictions are now the norm, it is a step in the right direction. Although, I don’t think anyone should celebrate a grand economic revival just yet.
Meanwhile, the one- and five-year LPRs were unchanged at 3.65% and 4.3%, respectively overnight. The decision was widely expected after the PBOC left the MLF unchanged at 2.75% earlier in the week. The economy still needs a boost over the coming year due to global economic headwinds, a struggling property market and COVID restrictions, but some have likened rate cuts to pushing on a piece of string as demand simply isn’t there. Support will have to come from elsewhere.
Yen Under Intense Pressure
The yen breached 150 against the dollar for the first time in more than 30 years overnight as the Bank of Japan was forced to conduct unscheduled JGB purchases in order to defend its yield curve control target. The intervention doom loop is alive and well, but pressure on the upper threshold is mounting and something will need to give eventually. There are clearly nerves around 150 about the prospect of a sizeable FX intervention, but it hasn’t yet been forthcoming. With warnings now entirely falling on deaf ears, it’s time for action as market pressures are not abating. If anything, they’re intensifying.
CBRT Pours More Fuel On Fire
The theme of this note seems to inadvertently be fighting fires, but the one difference in the case of the Central Bank of the Republic of Turkey is that it either doesn’t know the house is on fire or doesn’t care. Rather than holding back the flames, it’s pouring fuel on them, which is a rather unconventional and expensive approach in this climate. It even exceeded expectations today, cutting by 1.5% and lining up another before the end of this cycle. With inflation officially above 83% and cuts still coming, you have to wonder what exactly has convinced them to bother stopping at all.
Bitcoin Edges Higher
There isn’t much to add on Bitcoin. It continues to fluctuate around $20,000 and is currently sitting just below. It’s making small gains on the day, alongside other risk assets but doesn’t currently appear at risk of exploding in either direction.
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