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Pound climbs on uk tax cut reversal, oil jumps

oil jumps

The pound rose as far as $1.128, its highest in 10 days, while FTSE futures hinted at a strong recovery

Oil jumped on Monday as OPEC+ considered reducing output at its meeting later this week while the pound swung higher after the UK government said it would reverse a controversial tax cut that had roiled British markets.

Asian stocks mostly fell in holiday-thinned trade although Japanese markets found support on strong energy and semiconductor shares.

Sterling jumped in early London trade after the British government announced plans to reverse the proposed scrapping of the higher rate of income tax that has sparked a backlash in the governing Conservative Party.

The pound rose as far as $1.128, its highest in 10 days, while FTSE futures hinted at a strong recovery in a stock market that has been battered by concerns over Prime Minister Liz Truss and her finance minister Kwasi Kwarteng’s spending plans.

From a market perspective, it is a good step in the right direction. It will take time for markets to buy the message but it should ease the pressure, said Jan Von Gerich, chief analyst at Nordea. Questions still remain and sterling will likely remain under pressure.

Outside Japan, stocks fell around Asia. MSCI’s broadest index of Asia-Pacific shares ex-Japan was down 1.04%, on course for its fourth straight session of losses. It fell nearly 14% over the past quarter.

U.S. crude futures rose 2.70% to $81.64 a barrel after OPEC+ sources told Reuters oil production could be cut by between 500,000 and one million barrels a day. Brent crude rose 2.55% to $87.31 per barrel.

In Australia, where some states are observing a public holiday, the S&P/ASX 200 index fell 0.27%.

Hong Kong’s Hang Seng index dropped 1.75%.

South Korea had a national holiday and China entered the Golden Week break on Monday. Hong Kong is closed for a public holiday on Tuesday.

Euro Stoxx 50 futures lost 1.63%.

Investor focus will later swing to the September U.S. ISM manufacturing index.

ISM manufacturing is unlikely to dent the optimism around the U.S. economy that has been building up further with positive economic indicators released over the last few weeks, Saxo Bank market strategist Redmond Wong wrote in a research note.

The Reserve Bank of Australia meets on Tuesday, with markets widely expecting another 50 basis point rate hike while Japan’s consumer price index is likely to show another pickup in inflation.

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