📉 Truss issues

Plus: Yuan's line in the sand | Tuesday, September 27, 2022

Open in app View in browser   Presented By Hands Off My Rewards   Axios Markets By Matt Phillips and Emily Peck · Sep 27, 2022 🕶 It was a very complicated day in the markets, man. Let's sort it out. Here's the newsletter, in 823 words, a 3.5-minute read.     1 big thing: Pounded Illustration: Sarah Grillo/Axios   The British pound hit a new low against the dollar yesterday — the financial equivalent of a no-confidence vote in new Prime Minister Liz Truss, Matt writes. Driving the news: The pound sterling — the foundation of London's status as a global financial center — briefly plunged to a new low of roughly 1.04 against the dollar. The pound is down more than 20% against the dollar just this year. The big picture: Britain's unexpected 2016 Brexit vote to leave the European Union served as starting gun for the current era of compounding global uncertainty. The referendum ripped apart long-established systems that guided the country's trade, economic policy and political relationships. State of play: Capital rushed out of British markets after the government presented its so-called mini-budget on Friday. Prices for government bonds — known as "gilts" — tumbled along with the currency. Truss' plans leaned heavily on tax cuts — which would mean the government would have to borrow more — but didn't seem to include much detail about how such borrowing would boost Britain's long-term economic prospects. Truss' Conservative government— like many governments across Europe — faces the task of trying to manage surging inflation and an energy crisis. Yes, but: Just because Britain has gotten a rough ride in the markets in recent days, doesn't mean all government plans for dealing with difficult economic conditions will be treated similarly. Truss has repeatedly criticized prevailing economic orthodoxy, and recently removed one of the top civil servants at the U.K. Treasury, further unnerving investors. What we're watching: Whether other governments will get the Truss treatment from financial markets if they announce efforts to run larger deficits. Go deeper: U.K. tax cut proposals reverberate across markets     2. Charted: A 230-year low Data: FRED, Bank of England, and FactSet; Chart: Erin Davis/Axios Visuals     3. Catch up quick 📉 Dow Jones index enters bear market. (Reuters) 🪵 Lumber prices return to near pre-COVID levels. (WSJ) 🐟 How China targets the global fish supply, prompting backlash. (NYT) 🩺 Biogen to pay $900 million to settle allegations of improper doctor kickbacks. (WSJ)     A message from Hands Off My Rewards Congress, take your hands off my rewards     Despite record profits, mega-retailers and merchant groups are trying to trick Congress into passing harmful credit card routing mandates that will end popular rewards programs. What you need to know: Lawmakers must oppose the Credit Card Competition Act. Learn more.     4. It's not just the pound Data: FactSet; Chart: Simran Parwani/Axios The pound isn't the only major global currency falling rapidly. China's yuan passed a key line in the sand last week against the U.S. dollar — and continues to tumble, Axios' Kate Marino writes. The big picture: The weakening yuan is a sign that policymakers and investors are growing more concerned about the world's second-largest economy, which continues to struggle under COVID-related disruptions. In the recent past, Chinese officials have been leery of letting the yuan cross the seven-per-dollar threshold, only doing so in periods of intense stress like the Trump trade war and the early COVID days. But that level was breached last week, and yesterday $1 could get you as much as about 7.17 yuan at times. A weaker yuan will make Chinese exports to the U.S. more attractive since they'll be cheaper for U.S. buyers — potentially giving a lift to China's exporters. State of play: The value of the yuan is tied to an official price the government sets each day, after which the currency is allowed to fluctuate 2% in either direction in trading markets. China set the official price for the yuan at 7.0298 per dollar yesterday, the lowest since July 2020. Yes, but: While policymakers are allowing the depreciation, they don't want it to happen too quickly. To that end, the Chinese central bank yesterday announced a new rule that'll make it more costly for investors to sell yuan and buy dollars under certain foreign exchange contracts, the WSJ reports.   Share Axios and earn rewards If you like this newsletter, your friends may, too! Refer your friends and get free Axios swag when they sign up. Be a good friend and share   5. Gray matters Illustration: Aïda Amer/Axios   More professional women are letting their hair go gray, sticking with choices made in the early era of the pandemic, the WSJ reports. Why it matters: Older women have long faced age discrimination at work, and many sought to cover up any evidence that they were over 40. If pandemic era social changes stick around, that could be some measure of progress, Emily writes. Yes, but: It's still rare to see silver-haired women in leadership roles. Just three of the 32 female CEOs on the S&P 500 sport gray locks, according to Emily's analysis. Nearly half of working women age 50 and older surveyed by AARP recently said they feel pressure at work to dye their hair to cover the gray. Meanwhile, men who go gray are more likely to be viewed as distinguished, especially in CEO roles. Alas, there wasn't enough time to do a quick study of male hair color stats given the much larger sample size of male CEOs at S&P 500 companies. Driving the news: Gray hair came up as a possible reason for the surprise ouster of Canadian broadcaster Lisa LaFlamme last month. (Her employer has strenuously denied this.) Worth noting: Emily asked Elizabeth Stapp, a newly retired business school professor who focuses on gender equity, if gray hair would be a boost for women at the board of director level, where presumably wisdom is valued. "There aren't enough women in the boardroom to derive any meaningful conclusions," she said.     A message from Hands Off My Rewards Congress, take your hands off my rewards     Despite record profits, mega-retailers and merchant groups are trying to trick Congress into passing harmful credit card routing mandates that will end popular rewards programs. What you need to know: Lawmakers must oppose the Credit Card Competition Act. Learn more.    🇬🇧 1 thing Matt loves: A good politics pod. I've been a regular listener to "The Rest Is Politics," an update on the British political scene. Hosted by Alastair Campbell (ex-Labour Prime Minister Tony Blair's message smith), and Rory Stewart (ex-Conservative cabinet minister), it should be well worth listening to what they have to say on the implosion of the pound in the coming days. Today's newsletter was edited by Kate Marino and copy edited by Mickey Meece. Why stop here? Let's go Pro. 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