Crisis of Confidence

Britain is in a self-inflicted financial crisis that threatens to accelerate the economy’s dive into recession — and the country’s new prime minister is coming under intense pressure to blink. In the week since the government unveiled the biggest tax cuts since 1972 with scant detail of how they will be financed, the pound has crashed to its lowest-ever level against the dollar and the Bank of England has been forced to intervene amid concerns about the nation’s pension funds. What happens next will determine just how deep the looming recession proves.

New Sanctions Coming

The European Union proposed a new package of sanctions on Moscow that would ban European companies from shipping Russian oil to third countries above an internationally set price cap. European Commission President Ursula von der Leyen said the EU will propose a “sweeping” new import ban on Russian products that would cost Moscow 7 billion euros ($6.7 billion) in revenue, as well prohibit the sale of key technologies that could benefit its military. The new sanctions also would work to restrict the transfer of Russian wealth via digital assets like Bitcoin.

Not Going Anywhere

Janet Yellen, eager to see through crucial projects, has told White House officials she’s prepared to remain Treasury secretary well after the midterm elections, according to people familiar with the discussions. Her desire to stay comes as White House staff begin to prepare for potential Cabinet and other senior personnel departures or changes — including on President Joe Biden’s economic team — after the November vote. If she stays through next year, the ex-Federal Reserve chair would provide stability to Biden’s economic agenda should turmoil across energy and financial markets morph into a broader crisis.

Bold Move

Volkswagen set the final listing price for Porsche at 82.50 euros per share, valuing the company at 75 billion euros as it seeks to prove that the iconic sports-car brand can sidestep the slump in capital markets and pull off Europe’s largest initial public offering in a decade. A meeting of VW’s supervisory board and its executive committee late Wednesday approved the final list price, which sits at the upper limit of the 76.50-82.50-euro range first offered to investors. Porsche will mark its first day of trading when markets open on Thursday in Frankfurt.

Coming Up…

European equity futures nudged up as Asian shares rebounded after the strongest day for US stocks since early August. Porsche shares start trading in Europe’s largest initial public offering in a decade. It’s a busy day for central bank speakers as several ECB Governing Council members address a conference in Lithuania, while the Fed’s Loretta Mester and Mary Daly also attend events. Expected data include CPI inflation for Germany and Spain, plus Euro zone economic confidence and consumer confidence. H&M, Hella and Nike are among companies scheduled to release earnings.

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(Source: Bloomberg Sept. 29-2022)