Bleak New Reality

Chancellor of the Exchequer Jeremy Hunt laid bare a bleak new reality for the UK economy on Thursday, one plagued by weak growth and rising taxes for years to come. Hunt pieced together £55 billion ($65 billion) of tax hikes and spending cuts in a bid to stabilize public finances. Under his plan, the tax burden on Britons is set to soar to 37.1% of GDP, the highest level since World War II. Hunt did try to shield poorer Britons from the budget fallout, but even so, the hit to households — despite a total of £100 billion of support in energy bill subsidies and grants — will deepen a recession forecast to last until the end of 2023.

Exodus at Twitter

Elon Musk gave Twitter employees an ultimatum to either commit to the company’s new “hardcore” work environment or leave. Many more workers declined to sign on than he expected, potentially putting Twitter’s operations at risk, according to people familiar with the matter. So many employees decided to take severance that it created a cloud of confusion over which people should still have access to company property. Twitter closed its offices until Monday, according to a memo viewed by Bloomberg. Musk tried, in the final hours before his deadline, to convince people to stay.

Meloni’s First Budget

Giorgia Meloni’s government will devote about €30 billion ($31 billion) for extra spending in her first budget law as Italian prime minister, according to people familiar with the matter. The package set to be approved by the cabinet early next week will fund further measures to protect businesses and families from higher energy prices. A further €5 billion in EU support may be added to the total. The budget is the first test of Meloni’s pledges to continue on the path of fiscal responsibility and debt reduction set by her predecessor Mario Draghi. Final approval is due by Dec. 31.

The Chaos in SBF’s Wake

Advisers overseeing the ruins of Sam Bankman-Fried’s FTX Group laid bare a stunning list of allegations against the company’s former leadership Thursday, slamming non-existent oversight and the misuse of client funds as they struggle to locate billions of dollars in missing assets. “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information,” John J. Ray III, the group’s new CEO who formerly oversaw the liquidation of Enron, said in a sworn declaration submitted in bankruptcy court. The documents depict a free-wheeling crypto enterprise devoid of virtually every policy and practice that would be the norm for almost all other corporations.

Coming up…

European shares are set to follow their Asian counterparts higher as investors turn more hopeful about China’s reopening prospects. ECB President Christine Lagarde speaks at the European Banking Congress in Frankfurt, while the Fed’s Susan Collins addresses a conference. Expected data include UK retail sales, Norway GDP and Sweden unemployment. BW Offshore and Foot Locker are on tap for earnings results.

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(Source: Bloomberg, Nov. 18-2022)