U.S. Strategic Petroleum Reserve Falls to Lowest Level Since 1982
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The UK economy entered “uncharted territory” on Monday, battling an assortment of financial pressures as fears intensified ahead of the next Budget.
Diesel costs surged to a record high of 199.18p per litre, marking the latest energy shock on the UK economy. Stations were registered as charging 199.18p per litre, according to the RAC. The automotive firm said the price jump reflected “just how exposed the UK is to events occurring far away”.
Brent crude – the international benchmark for oil prices – also tipped above $96 per barrel after a four per cent jump on Monday morning. This followed renewed uncertainty around peace between the US and Iran after Trump rejected a proposal that sought to reopen the Strait of Hormuz.
“UK fuel costs have now entered unchartered territory, and there will be rising concerns about the economic impact, and how the Bank of England will react,” Kathleen Brooks, research director at XTB, said.
The rising pressures came as Chancellor John Healey took to the stage at the Labour party conference to deliver his keynote address.
The two-year gilt yield – a gauge of short-term interest rate expectations – was up six basis points to 4.75 per cent as Healey delivered his speech. Meanwhile the 10-year, which indicates how much interest the government will pay to borrow, was up five basis points to 5.4 per cent – a whisker away from breaching the 19-year high recorded earlier in the month of 5.41 per cent.
The geopolitical tensions in the Middle East have weighed on global yields, but the domestic uncertainty in the UK ahead of October’s Budget is adding additional hesitancy for investors.
Angeline Ong, senior technical analyst at IG, said Burnham’s refusal for “crude cuts” to welfare leaves the market “wondering where the fiscal credibility is going to come from”.
“Voters and investors want fiscal clarity, but at the moment what they are getting is a credibility gap.”
Healey said on Monday the money Labour had in the 90s was “simply not there now” as he took aim at the Conservatives for “losing control of British finances”.
The Chancellor said he would balance the books by maintaining “a buffer against uncertainty, controlling borrowing to bring down inflation, and reducing long term pressures on our finances.”
CityAM.com is the online presence of City A.M., London's first free daily business newspaper. Both platforms cover financial and business news as well as sport and…
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