Market Prognosis

A concise summary of the major macro events of the past 24 hours, and selected UK company-specific news.

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October 17, 2022

Markets respond calmly to political turmoil

Macro & Overnight

Stocks in London are called a touch lower on Monday, though the pound was on the up, despite the prospect of more UK political uncertainty.

The position of Prime Minister Liz Truss remains precarious, despite the appointment of a new chancellor.

The move to appoint Hunt was an effort to steady the ship, but Truss still faces calls to go.

Last week Andrew Bailey’s three-day warning to the UK pension funds effectively served notice on the government to change course. He was the gilt market vigilante who did for Kwarteng and left Truss hanging by a thread.

Having won the battle does not mean that Bailey has won the war. We now have the next test of his resolve, as the staring match resumes with the LDI-laden pension funds. They have chosen to “only” unwind £19bn of assets to the BoE temporary facility, the buyer of last resort. Have they done enough, or are they playing a game of chicken with Bailey? Who will blink first?

Today sterling is slightly stronger on eased political uncertainty, but gilt yields are higher but not spiking. Markets appear relatively calm, given the tumultuous politics of the last few days.

UK Company News

Online fashion retailer Asos said it is in talks to amend covenants in a credit facility, a move the online retailer believes will offer it better “financial flexibility” amid the current economic uncertainty. The RCF matures in July 2024. Reports over the weekend noted that a credit insurer for Asos’s suppliers had reduced its support. This could force Asos to pay for products upfront.

Mattress maker Eve Sleep has appointed administrators after talks to sell the company broke down.

Sofa seller has received a “number of indicative non-binding proposals” during its formal sale process.

The AIM market is set to lose its largest listing, Abcam, which is moving to an exclusive NASDAQ listing.

Troubled defence company Avon Protection has a new CEO, starting in January.

RM, the educational IT supplier, has warned regarding implementing its ERP system. (An IT company unable to eat its own cooking).


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