European shares surged at the open on Friday on reports the UK government was about to perform the latest u-turn on its much-derided plan of tax cuts as Finance Minister Kwasi Kwarteng made a late night dash from the US for emergency talks with Prime Minister Liz Truss.
The Stoxx 600 benchmark index was up 1.08% in early deals on the news. Kwarteng cut short his visit to the International Monetary Fund in Washington to deal with the crisis that in recent days has taken on soap-opera proportions.
Britain’s Conservative government has come under fire from its own restive MPs, terrified at the prospect of losing power for the first time in 12 years, and the IMF over its plans for £45bn of unfunded tax cuts that were not subject to independent review.
The plan forced pension funds using derivatives as part of their investment portfolio to dump government bonds they held in order to meet cash calls from lender banks, pushing gilt prices down and forcing the Bank of England to spend billions to provide financial stability.
That emergency bond-buying ends on Friday and the bank has said officially it would not extend its deadline. Britain’s FTSE 100 index was up 0.89%.
In equity news packaging and paper group Mondi gained as it reported a 55% jump in third-quarter underlying core earnings amid higher selling prices and volume growth.
On the downside, International Distribution Services slumped after it said its Royal Mail unit was set to fire up to 6,000 staff as part of an overall 10,000 job losses, blaming industrial action and lower parcel volumes.
Swiss banking software group Temenos slumped by 20% after slashing annual forecasts on Thursday.
Reporting by Frank Prenesti for Sharecast.com
