The pound is taking a severe beating
Italy’s first female PM
A private warning against Russia’s nuclear threat
Updates to the EU’s draft energy plan
Taking a pounding
The pound plunged almost 5% to a record low after Kwasi Kwarteng vowed to press on with more tax cuts even as markets delivered a damning verdict on the new Chancellor of the Exchequer’s fiscal policies. The bulk of the currency’s slide on Monday took place in a frantic 20-minute selloff, evoking cries of a flash crash by traders. The beleaguered currency fell to as low as $1.0350, as investors punished the Chancellor for his unapologetic dash for growth. If the rout continues and widens into broader markets, there’s a risk Prime Minister Liz Truss’s days-old administration may be pushed into a crisis that could force a rapid policy response.
Italy’s Got New PM
Giorgia Meloni won a clear majority in Sunday’s Italian election, setting herself up to become the country’s first female prime minister at the head of the most right-wing government since World War II. Her alliance, which also includes Matteo Salvini’s League and Silvio Berlusconi’s Forza Italia, claimed about 43% of the vote, according to projections for RAI, the public broadcaster. Meloni emerged from the political fringes after leading the opposition to Mario Draghi’s technocratic administration, yet the charismatic 45-year-old has little experience of governing and she would be taking office at a perilous moment for her country.
You’ve Been Warned
President Joe Biden’s administration has privately told the Kremlin that any use of nuclear weapons in the war in Ukraine would have “catastrophic consequences” for Russia, White House National Security Adviser Jake Sullivan said. Russian President Vladimir Putin renewed his warnings of a nuclear threat last week as he mobilized hundreds of thousands of reservists after Ukrainian forces recaptured a swath of Russian-occupied territory. Those nuclear threats are “a matter that we have to take deadly seriously,” Sullivan said on CBS’s “Face the Nation” on Sunday. Sullivan said the US also has made it clear in public that it would “respond decisively if Russia uses nuclear weapons.’’
EU’s Energy Plan
The European Union’s plan to contain the energy crunch will give member states leeway to cut electricity consumption less than currently proposed, Italian newspaper Corriere della Sera reported, citing a draft document. The European Commission aims to publish on Sept. 28 a document detailing future steps the bloc could take to ease the crisis, Bloomberg reported earlier. The proposal under consideration says each state must reduce energy consumption by 5% per hour during peak price hours, representing at least 10% of all hours from Dec. 1, 2022, through March 31, 2023. However an update to the draft now says countries may decide to set a target for a different percentage of peak hours, as long as at least 7% of peak hours are covered.
European stocks are on course for another day of declines as fears of faster inflation and global recession continued to pummeled markets. Asian shares slid on Monday and the dollar maintained its rally. ECB President Christine Lagarde is to appear before the Committee on Economic and Monetary Affairs of the European Parliament in Brussels. Expected economic data include German business confidence, Spain PPI. No major company earnings scheduled.
(Source: Bloomberg Sept. 26-2022)