Your Sunday UK Briefing:  A Painful Rate Hike Lies in Wait


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Hello again, and happy Sunday. Here’s what we have our eye on for the next few days. The big hikes: The BOE and the Federal Reserve are both expected to make 75-basis-point rate hikes  this week in their bid to drag down inflation. But the US economy, fresh off a positive GDP print for the third quarter, looks in better shape to absorb the shock.  The BOE’s situation on Thursday is far less comfortable as it delivers what would be the biggest UK rate hike since 1989. It’s been a painful end to more than a decade of cheap money.  Not only is the country already probably in a recession, with mortgage markets  in full-blown crisis mode (a two-year fixed mortgage is the highest in 14 years), but officials are also furiously trying to reestablish confidence after former Prime Minister Liz Truss’s unfunded fiscal plan tanked markets. Bond traders are still gearing up for fresh volatility.

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The big agenda: We know what’s not coming out this week — Chancellor Jeremy Hunt’s planned economic statement, which was pushed to Nov. 17 from its ominous Halloween date. That gives Hunt and new Prime Minister Rishi Sunak time to construct a plan aimed at plugging Britain’s budget shortfall and clean up the wreckage left by the short-lived Truss government. A combination of tax hikes and spending cuts, potentially totaling £50 billion, are in the works, but they won’t come without pain. The share of Britons struggling to make ends meet has doubled in the past year, and for millions there’s no more corners left to cut.  Sunak also has plenty of work ahead to put the Humpty Dumpty party together again.The big earnings:   You may not have heard the last of energy-company windfall taxes with oil majors Saudi Aramco and the UK’s own BP Plc to report results on Tuesday. In the past week, Exxon Mobil, Chevron, Shell and TotalEnergies announced they would raise buybacks and dividends by $100 billion annually while reinvesting just $80 billion into their core businesses, Bloomberg’s Kevin Crowley and William Mathis reported.  President Joe Biden was irate, tweeting that “giving profits to shareholders is not the same as bringing down prices” for regular families. Sunak is mulling extending a windfall-profits tax on energy producers as part of his budget mix.

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The big handle:  Social media watchers are glued to Twitter to see if @realDonaldTrump, the handle of the former US president, is brought back to life under Elon Musk. The billionaire said on Friday, on Twitter of course, that the company “will be forming a content moderation council with widely diverse viewpoints.” That means it may be some time before Trump’s life ban potentially ends. On Friday, a day after the new “Chief Twit”  took control, a “tide of slurs and racist memes” bubbled up on Twitter, Davey Alba reports, in an apparent bid to test the new free-speech waters.The big stat: Global food price inflation made screaming headlines earlier this year, but the retreat from record highs has been less heralded. On Friday the UN’s Food and Agricultural Organization issues its latest global Food Price Index, which measures monthly changes in a basket of food commodities, from grains to meat to sugar. The index dropped for a sixth month in September, while remaining 5.5% above a year ago. The respite may be short-lived after Russia announced Saturday that it was pulling out of the deal to ensure safe transit of Ukrainian grain from Black Sea ports, a move likely to drive up global wheat prices. The big meeting: Foreign ministers from the Group of Seven nations will gather in Munster, Germany on Thursday, to discuss “strategic challenges in foreign and security policy.” Russia’s invasion of Ukraine, now into its ninth month, continues to challenge unity among allies on topics from the troubled  oil price cap pushed by the US, to potential new sanctions, to military aid and now the grain-initiative move. Weeks of air strikes against Ukrainian energy equipment look set to make it a dangerous winter, even far from the front lines.  James Cleverly, a holdover from the Truss administration, will attend his first G-7 meeting as foreign secretary. The big dark: Daylight savings time ended Sunday in the UK and much of Europe, and clocks “fall back”  in the US in a week. That tends to kick off a debate about whether DST should exist at all, or whether permanent daylight savings is the better option, to have more afternoon light in winter and potentially use less energy by doing do. Europe’s power crunch has made the discussions even more timely, and energy prices remain the biggest threat to UK households. ICYM our Big Take: UBS headquarters seem like a paragon of Swiss discretion and calm, especially compared with its troubled Zurich neighbor Credit Suisse Group. But the intrigue under the surface — and especially tensions between Dutch-born CEO Ralph Hamers and Iqbal Khan, the powerful head of the bank’s wealth business, is truly the stuff of television drama, Marion Halftermeyer and Myriam Balezou report.  The two men clash on how to carry the 160-year-old bank forward, and whether the focus should remain on providing bespoke services to the uber-rich, or trek down the mountain to those “who merely reside in the foothills of great wealth.”And finally,  as the nights close in and a cozy time catching up on “Billions” seems like a good plan, check out our new Big Take podcast, “Clash of the Streaming Titans,” on how the defining conflict between Netflix and HBO changed the television landscape. Bloomberg media reporter Felix Gillette, co-author of the upcoming book  “It’s Not TV: The Spectacular Rise, Revolution, and Future of HBO,” has the answers. 

Have a good week, and see you on the other side. 


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