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Bitcoin is considered a “safe haven” relative to sterling after the mini-budget market turmoil
The extent of the turmoil in the city’s FX market caused by the September mini-budget was revealed today after new data showed sterling’s volatility predicted a 10-fold increase in pound-to-bitcoin traffic volume triggered spot exchanges.
According to cryptocurrency hedge fund Tyr Capital, a staggering $6 billion worth of bitcoin pound trades found in the days following the budget is seen as a “safe haven” relative to sterling.
Ed Hindi, chief investment officer at Tyr Capital, told the Standard: “These numbers are significant and something we haven’t seen in the developed world historically.
“We have only seen it in developing country currencies like the Turkish lira. It gives you an idea of how much distrust there has been in the new government’s fiscal policy.”
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Schroders fund has shed £21bn in just three months
THE impact of central government chaos on the city was revealed today as Schroders revealed its funds have fallen by an extraordinary £21bn over the past three months.
That’s a direct result of the pension fund crisis that followed the now-abandoned mini-budget, which caused investors to panic-sell UK bonds over concerns about the nation’s long-term financial health.
Schroders, one of the biggest names in the Square Mile, has been around since 1804 and is widely regarded as one of the city’s most stable and well-run institutions.
Its wealth fell from £773 billion to £752 billion between July and September, largely due to LDI (liability-driven investment) strategies, which pension funds use to combine assets and liabilities.
When the gilt market collapsed and the Bank of England was forced to step in, some bonds were on the brink of collapse.
Schroders did not comment further than its statement to the stock market today and Chief Executive Peter Harrison declined to speak to the Standard as he tried to calm nervous investors. Schroders shares have halved over the past year to 375p today.
Schroders is far from the only company in town hit by market turmoil, but it looks to be one of the worst hit.
Its rival Jupiter Fund Management reported today that clients siphoned £600m from the company in the last quarter. The state of the industry is such that Jupiter took this as a sign that business was improving.
Jupiter’s wealth is down £11bn to £49bn this year.
New chief executive Matthew Beesley told the Standard that while global issues are at stake, “there are clearly some additional challenges for the UK market…due to the government’s fiscal approach”.
He cited “a deteriorating macroeconomic backdrop, ongoing geopolitical challenges and inflation concerns, particularly in the UK”. Jupiter shares are down 63% this year.
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Christmas comes early for IG Design as shares surge 12%
Christmas has come early for gift-wrap company IG Design after it said its sales and profits got an unexpected boost as consumers started their holiday shopping earlier.
The Bedfordshire-based company said customers were likely trying to avoid some of the supply chain disruption that had caused delays in the delivery of Christmas gifts last year. However, the company warned of a prolonged decline in consumer sentiment.
IG Design shares rose 12% to 91 pence. Shares of the company fell 60% earlier in the year after a spate of supply chain issues forced the company to cancel paying a dividend.
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Homebuilders fall after downgrades, Burberry shares rise
The FTSE 100 index is 20.22 points lower at 6904.77 and the FTSE 250 index is down 48.99 points at 17,199.39 as investors take their lead from yesterday’s Wall Street close.
Oil companies BP, Shell and Harbor Energy defied the slowdown by gaining more than 1%, while Burberry was also up 2% as investors were encouraged by an upbeat earnings update from competitor Hermes.
The biggest declines came from the housing sector after analysts at Deutsche Bank sharply lowered their estimates on expectations of lower house prices, lower volumes and persistent construction cost inflation.
Persimmon shares fell 32p to 1201p and Taylor Wimpey fell 2.3p to 86.5p.
In the FTSE 250 index, shares in Travis Perkins, National Express and Dunelm were all lower despite reassuring trade updates.
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Dunelm sales have fallen but the sales forecast stands
Dunelm, the FTSE 250 housewares retailer, has reported a fall in sales but stuck to its full-year guidance and strong demand for seasonal products, including its ‘Winter Warm’ range.
Sales fell 8% to £357 million in the fiscal first quarter, with the share of digital sales remaining steady at third place. The chain, which has nearly 200 stores, also pointed to “external headwinds”, including “particularly volatile” exchange rate movements in recent weeks, but said it was “very well hedged” for the remainder of its fiscal year.
Nick Wilkinson, Managing Director. said: “As we enter what is clearly a challenging winter for consumers, our absolute focus remains on making every pound count for everyone by maintaining a firm grip on operations.”
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Rising yields hit Wall Street stocks, Tesla falls
The US 10-year Treasury yield topped 4.1% last night for the first time since October 2008, reflecting expectations of another big 0.75% rate hike when the US Federal Reserve holds its next on November 2nd monetary policy decision announced.
The rise followed comments from a number of Fed policymakers, one of whom highlighted that interest rates may need to rise above 4.75% to fight inflation. Fed interest rates are currently in the 3.25% range after a series of hikes of 0.75%.
Equity markets were hurt by the rise in 10-year yields as the S&P 500 lost 0.7% during its first weak session of the week.
The Nasdaq fell nearly 1% and futures markets are pointing to another decline today after Tesla’s update disappointed last night, even as third-quarter revenue rose 56% to a record $21.45 billion.
The Elon Musk-led company highlighted supply chain issues and inflationary pressures as factors impacting its performance over the period. Shares fell 5% in after-hours trading.
Hargreaves Lansdown analyst Sophie Lund-Yates said: “Decades of inflation, soaring energy bills in Europe and signs of a weakening Chinese market were all red flags that fed into Tesla’s quarterly results. We see that the strength of the group’s brand keeps it resilient in times of deep economic uncertainty.
“With all that has been said, there are challenges down the road. We have yet to understand how deep an upcoming recession will be, and it has the potential to rock Tesla’s chassis. There is a limit to how far prices can go without volumes falling.”
In London trading, CMC Markets expects the FTSE 100 to open 18 points lower at 6,907.
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Naked Wines chairman resigns as firm promises ‘aimed at profit’
The naked wine chair is stepping down effective immediately, the firm said, as it warned revenue would fall in the coming months while promising a “pivot to profit”.
Nick Devlin, CEO, said: “We recognize that in pursuing rapid growth we have made mistakes.
“Although business is substantially larger today than pre-pandemic, in 2021 we purchased inventory and increased our cost base in anticipation of continued faster growth that did not deliver; Today we are taking steps to reset our cost base and de-stocking.
The stock is the ninth most shorted stock in the UK according to ResearchTree.
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