Markets up after Bank of England bond-buying pledge
29-09-2022, 09:31

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Stock markets in Asia and the US have risen after the Bank of England said it would buy £65bn of UK government bonds.

The announcement came after Friday's mini-budget sparked financial market turmoil and the pound plunged.

Investors also demanded higher returns on government bonds, or "gilts," causing some to slide in value.

Speaking in New York on Wednesday, new UK trade secretary Kemi Badenoch defended the government's economic policies.

Hong Kong's benchmark Hang Seng index was 1.3% higher, while Australia's ASX 200 rose by 1.8% and South Korea's Kospi gained 1.4%.

That came after New York's main stock indexes rebounded from a six-day losing streak to end Wednesday's trading day around 2% higher.

In morning Asia trade, the pound was 0.8% lower at $1.08, after earlier making strong gains on the Bank of England's bond-buying announcement.

The currency hit a record low on Monday after chancellor Kwasi Kwarteng unveiled plans to tax cuts, funded by borrowing, in a push to boost economic growth.

Analysts said the Bank's pledge to buy government bonds at an "urgent pace" to help restore "orderly market conditions" had helped to calm market volatility.

 

"The Bank of England's intervention has supported market optimism," Jun Bei Liu, portfolio manager at Tribeca Investment Partners in Sydney, told the BBC.

"It reversed a previous view of the UK going into a hard landing and debt spiralling out of control," she said.

Yeap Jun Rong, market strategist at online trading platform IG, said the move had "provided some much-needed relief to recent market jitters."

In New York, the UK's international trade secretary used her first visit to the US since taking the role to try to shore up investor confidence.

"You would by now have heard the Bank of England is taking short-term measures to provide stability, as is their job," Ms Badenoch said.

"And we must look at all of this in the context of the fundamentals, which are that the UK economy is strong and we have a plan, a growth plan to cut taxes, promote enterprise, and cut red tape for business," she added.

BBC

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