IMF urges Truss to reverse top rate tax cut in rare intervention
Moody's threatens to downgrade UK credit rating after tax cuts
FTSE 100 drops as much as 2pc; Pound falls back below $1.07
Ambrose Evans-Pritchard: Liz Truss must choose between a fiscal U-turn and a housing crash
Sign up here for our daily business briefing newsletter
The pound and FTSE 100 have slumped after both the International Monetary Fund and Moody's made shock interventions over the Government's tax-slashing Budget.
Sterling dropped back below $1.07 in Asia trading, reversing some of its recovery after the currency slumped to an all-time low against the dollar at the beginning of the week.
The FTSE 100 crashed as much as 2pc to a 17-month low, with banks and energy stocks leading the decline as the outlook for the economy darkened further.
Investor jitters were reignited when the IMF urged Prime Minister Liz Truss to reverse the decision to scrap the top rate of income tax.
In a highly unusual intervention in a developed country's economic policy, the body said it was closely monitoring developments and warned the fiscal stimulus risked undermining the Bank of England's efforts to curb inflation.
Ratings agency Moody's joined the attack on the Chancellor's plans, raising the possibility of a credit rating downgrade for the UK.
Moody's said it was now not expecting economic growth to return to its potential until 2026, and cut its forecasts for real GDP growth next year to 0.3pc from 0.9pc.
German consumer confidence slides further
Things aren't looking great over in Germany either, where consumer confidence remains on a record downward slide amid soaring inflation and a looming winter energy crisis.
GfK's confidence gauge fell to minus 42.5 points for October, hitting a record low for the fourth month in a row, following a revised September reading of minus 36.8 points.
Rolf Buerkl, GfK consumer expert, said: "The currently very high inflation rates of almost 8pc are leading to large real income losses among consumers and thus to a significant reduction in purchasing power.
"Many households are currently being forced to spend significantly more on energy."
The leaders of Germany's 16 states will meet today to discuss additional relief measures to help tackle the energy crisis - but without Chancellor Olaf Scholz, who tested positive for Covid-19 earlier this week.
Kwarteng to ask bankers not to bet against the pound
There are some intriguing details emerging about Kwasi Kwarteng's meeting with Wall Street bosses today.
Sky News reports that the Chancellor will ask Wall Street bankers not to bet against the pound after it dropped to a record low against the dollar.
That would be a pretty extraordinary request from a Government that advocates free markets...
UK 30-year yield hit highest since 1998
Government borrowing costs are still surging, with the 30-year yield soaring to its highest since 1998.
It comes as the Bank of England prepares for a £5bn gilt sale. It was originally planned for mid September but pushed back due to the Queen's death.
Chinese yuan crashes to record low against dollar
If it's any consolation, the economic woe isn't just being felt in Britain.
China's internationally-traded yuan has tumbled to its lowest level on record as the dollar continues to gain ground.
The domestic currency also tumbled to its lowest since the global financial crisis in 2008.
The decline has fuelled speculation that China's central bank will slow the pace of monetary policy easing to avoid adding further pressure on the yuan.
Meanwhile, there were declines across Asian markets this morning, with Japan's Nikkei closing 1.5pc lower and Hong Kong stocks sinking 3pc.
UK could end up in doom loop, warns top economist
The UK economy is at risk of ending up in a "doom loop" of falling currency and rising interest rates, a top economist has warned.
Julian Jessop struck a cautious tone over the outlook, but insisted the recent market meltdown had been an overreaction.
He told Radio 4's Today programme:
Kwarteng to meet Wall Street bosses today
Kwasi Kwarteng will have another tricky meeting on his hands today when he tries to reassure US banking bosses that the Government hasn't lost control of the economy.
The meeting will be with Wall Street firms including Bank of America, JP Morgan, Standard Chartered, Citi, UBS, Morgan Stanley and Bloomberg.
It comes after the Chancellor spoke to City chiefs yesterday and doubled down on his tax-cutting fiscal plans. He's due to unveil more details about reforms to financial regulations next month.
FTSE risers and fallers
The FTSE 100 has slumped sharply at the open as the outlook for the UK continues to darken.
The blue-chip index tumbled more than 2pc, with sentiment dented by interventions from the IMF and Moody's.
Energy and mining stocks were the biggest drag on the index, as a strengthening dollar weighed on metal prices and Hurricane Ian sparked further oil supply cuts.
Rate-sensitive banks including HSBC and Lloyds dropped more than 4pc.
There were also losses for retailers amid rising fears about consumer confidence. Burberry bucked the trend, rising 3.6pc after it named Daniel Lee as its new chief creative officer, replacing Riccardo Tisci.
The domestically-focused FTSE 250 also dropped 2.2pc, with Aston Martin tumbling 10pc amid ongoing concerns about its debt.
UK economy is in a jam, pickle and stew, says Lord Rose
Lord Rose, the veteran retail executive and Tory peer, sums up the gloomy outlook with characteristic British understatement.
He told Radio 4's Today programme:
Lord Rose added that it was "not necessary" to cut the top rate of tax "at this particular time"
Shop price inflation hits record high
In a further sign of the doom this morning, food inflation hit a record high even before the slump in the pound, as businesses grappled with soaring costs and cuts to household spending.
Laura Onita reports:
UK companies face highest borrowing costs on record
It's not just the Government facing sky-high borrowing costs - the crisis is hitting British companies too.
UK blue-chip companies are now facing their highest bond refinancing costs on record as Liz Truss's tax-cutting package wreaks havoc on the markets.
The difference in the rate investment-grade companies need to pay if they issue sterling bonds now compared to coupons on existing debt climbed to 325 points, according to Bloomberg data.
That's the highest level since the index began more than two decades ago, usurping the previous high hit in the aftermath of the 2008 financial crisis.
The jump means companies would have t pay an additional £3.25m annually for every £100m they borrow. It comes at a time when margins are already being eroded by soaring energy costs and supply chain troubles.
FTSE 100 slumps at the open
The FTSE 100 has fallen sharply at the open amid renewed pessimism about the Government's tax-cutting economic policy.
The blue-chip index dropped 0.8pc to 6,927 points.
IMF 'coming from errors of past', says Tory MP
While international bodies sound the alarm over UK policy, there's a dissenting view from Sir John Redwood.
The Tory MP told Radio 4's Today programme:
IMF intervention is rare, says former deputy chief
Adnan Mazarei, former deputy director of the IMF, says it's very rare for the world's lender of last resort to intervene in a developed country's economic policy.
He told Radio 4's Today programme:
What did the IMF say?
This morning's fall in the pound has been sparked mainly by a hugely unusual intervention by the IMF. Here's some more detail:
Read the full story: IMF urges Truss to reverse top rate tax cut in rare intervention
Pound slips back below $1.07
After a robust recovery on Tuesday, sterling is back in the red.
The pound slipped back below $1.07 after a highly unusual intervention by the IMF stoked investor concerns.
While it's comfortably above the all-time low of below $1.04 hit on Monday, the pound is still languishing in historical terms and many traders are betting it will hit parity by the end of the year.
Pound falls again
The pound has sunk back into the red after two major interventions last night reignited investor concerns about the UK's tax-cutting Budget.
In an extraordinary development, the IMF urged Prime Minister Liz Truss to reverse her economic policies - pointing particularly to the decision to scrap the higher rate of income tax.
Ratings agency Moody's also warned that the policies risked "permanently weakening the UK's debt affordability", in the strongest suggestion yet that the country is facing a credit rating downgrade.
The pound, which crashed to an all-time low against the dollar earlier this week, dipped back below $1.07.
5 things to start your day
1) IMF urges Truss to reverse top rate tax cut in rare intervention Highly unusual move by world's lender of last resort condemned by senior Tories as it adds to pressure on PM and Chancellor
2) Building societies under pressure as lending costs rocket Smaller lenders are more exposed to swings in wholesale interest rates than larger high street banks, which lend off their deposit bases.
3) Bank signals 'significant' response to turmoil BoE chief economist Huw Pill was speaking as long-term borrowing costs hit their highest level since 2002
4) Fears of job cuts as MailOnline and Daily Mail to merge operations It comes as the publisher attempts to forge a digital future for titles that frequently overlap and compete.
5) Christmas shopping chaos looms as Royal Mail staff plan 19 days of walkouts Union leaders have launched a significant escalation in their industrial dispute with Royal Mail, warning of severe disruption to deliveries
What happened overnight
Sterling dipped again this morning, falling nearly 1pc against to dollar to $1.0634.
Asia resumed its downwards trend, with Tokyo, Hong Kong and Seoul all down more than 2pc, while Shanghai, Sydney, Singapore, Wellington, Taipei, Manila and Jakarta were also off.
Coming up today
Economics: BRC shop price index (UK), crude oil inventories (US), pending homes sales (US), gross domestic product (US)
Corporate: Boohoo, Everyman Media (interims)