Truss and Tories

Liz Truss will try to get her beleaguered UK premiership back on track on Wednesday, after a bruising few days that exposed deep divisions in her ruling Conservative Party and left even members of her top team in open disagreement about what to do next. Truss is struggling to keep control less than a month into her tenure, already forced into a humiliating U-turn over her plan to cut income tax for Britain’s highest earners, which spooked financial markets and hammered support for the Tories in opinion polls. Yet on Tuesday, tensions were still simmering and two members of her Cabinet expressed disappointment that she had backed down.

Back on the Table

Elon Musk revived a bid to buy Twitter at the original price of $54.20 a share, backtracking on his effort to quit the deal and potentially avoiding a contentious courtroom fight. Musk made the proposal in a letter to Twitter on Monday, according to a filing with the Securities and Exchange Commission that confirmed a Bloomberg report. Shares of Twitter climbed 22% to $52 at the close in New York. San Francisco-based Twitter said it received the letter and intends to close the deal at the agreed-upon price, without commenting specifically on how it will respond to Musk. Meanwhile, Musk teased something called “X, the everything app” after he buys Twitter. Based on the billionaire’s past comments, that service could look a lot like Chinese super-app WeChat.

No Aussie-Style Pivot

Federal Reserve officials are starting to get what they want from the economy, but the bar for any “pivot” toward a less-aggressive monetary policy tightening path is probably still high. Australia’s central bank surprised investors Tuesday with a smaller-than-expected interest-rate increase, helping fuel a global rally in stocks amid hopes other central banks would soon follow. A monthly US Labor Department report on job openings also suggested labor demand is beginning to recede — a key development for the Fed. Even so, top officials at the US central bank are warning that the fight against inflation will require more time and they aren’t giving any hints that a similar down-shift could come at their next policy meeting in November.

Eyes on Credit Suisse

A Credit Suisse business that lends out shares reversed some of those transactions in recent days after investors that provided the securities pulled back over concern about the bank’s financial health. The Zurich-based lender told borrowing clients at the stock-loan unit that some counterparties temporarily stopped dealing with it because of mounting market pressure, according to people with knowledge of the matter. The unit saw less than 5% of the total pool pulled and there was no funding impact for Credit Suisse, one of the people said. Still, the pullback of clients underscores the urgency surrounding Chief Executive Officer Ulrich Koerner’s plans to repair the bank and regain market confidence after a brutal few years.

Coming Up…

European stocks are set to take a breather as traders assess this week’s global equity rally and the prospect of slower central bank tightening. The OPEC+ coalition meets to consider an output cut of as much as 2 million barrels a day, double what was previously anticipated. Atlanta Fed’s Raphael Bostic discusses inflation during a virtual event. The Nobel Prize for Chemistry is awarded. Expected data include Eurozone services PMIs. The impact of inflation on Tesco and its customers will be in focus when the UK grocer reports results.

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(Source: Bloomberg, Oct. 5-2022)