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Wall Street opens higher; pound rallies after UK tax retreat

NEW YORK (AP) — Stocks are opening higher on Wall Street as Treasury yields ease off their multiyear highs. The S&P 500 rose 0.9% in early Monday trading. The British pound strengthened and borrowing costs for the U.K.
A person looks at an electronic stock board showing Shanghai, Japan's Nikkei 225 and New York Dow indexes at a securities firm Monday, Oct. 3, 2022, in Tokyo. Asian shares were mostly lower on Monday after Wall Street closed out a miserable September with a loss of 9.3%, the worst monthly decline since March 2020. (AP Photo/Eugene Hoshiko)

NEW YORK (AP) — Stocks are opening higher on Wall Street as Treasury yields ease off their multiyear highs. The S&P 500 rose 0.9% in early Monday trading. The British pound strengthened and borrowing costs for the U.K. government fell after the new, embattled government of Prime Minister Liz Truss abandoned plans to cut income tax rates for top earners, part of a package of unfunded cuts that had set off turmoil in financial markets and sent the pound to record lows. Crude oil prices were sharply higher ahead of a meeting this week of OPEC+. The oil cartel is expected to accounce production cuts.

THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.

U.S. futures moved slightly higher on Monday morning as markets open the month trying to shake off a miserable September marred by fears that the Federal Reserve's aggressive interest rate hikes would hurtle the U.S. economy into a recession.

Futures for the Dow Jones Industrials rose 0.8% and futures for the S&P 500 gained 0.7%.

September saw the S&P 500 tumble to its worst month since the coronavirus pandemic crashed global markets. It enters October at its lowest level since November 2020 and is down by more than a quarter since the start of the year.

The Fed has been at the forefront of the global campaign to slow economic growth and hurt job markets just enough to undercut inflation but not so much that it causes a recession. On Friday, the Fed’s preferred measure of inflation showed it was worse last month than economists expected. That should keep the Fed on track to keep hiking rates and hold them at high levels a while, raising the risk of it going too far and causing a downturn.

Shares dropped in Europe and Asia on Monday while oil prices surged more than $3 a barrel amid dire warnings over energy shortages in Europe if Russia cuts off gas supplies.

Germany’s DAX fell 0.1%, while the CAC 40 in Paris shed 0.4%. Britain’s FTSE 100 lost 0.4%. All were down even more earlier but recovered some of those losses by midday.

The British government on Monday dropped plans to cut income tax for top earners, part of a package of unfunded cuts unveiled only days ago that sparked turmoil on financial markets and sent the pound to record lows.

In a dramatic about-face, Treasury chief Kwasi Kwarteng abandoned plans to scrap the top 45% rate of income tax paid on earnings above 150,000 pounds ($167,000) a year.

He and Prime Minister Liz Truss have spent the last 10 days defending the cut in the face of market mayhem and increasing alarm among the governing Conservative Party.

Also in Europe, the Paris-based International Energy Agency said in its quarterly gas report that people will have to save at least 13% over the winter if Russia cuts off the last trickle of gas that’s flowing to Europe.

Europe faces “unprecedented risks” to its natural gas supplies this winter after Russia cut off most pipeline shipments and could wind up competing with Asia for already scarce and expensive liquid gas that comes by ship, the IEA said.

Reports that major oil producers plan further production cuts were also exerting upward pressure on energy prices.

U.S. benchmark crude oil gained $3.39 to $82.88 per barrel in electronic trading on the New York Mercantile Exchange. It lost $1.74 to $79.49 per barrel on Friday.

Brent crude oil, the standard for pricing international oil, rose $3.33 to $88.47 per barrel.

OPEC and allied oil-producing countries, including Russia, made a small trim in their supplies to the global economy a month ago, underlining their unhappiness as recession fears help drive down crude prices.

In Asian trading, Japan's Nikkei 225 index gained 1.1% to 26,215.79 after a Bank of Japan quarterly survey showed sentiment among manufacturers has darkened, reflecting rising costs, the weakening yen and lingering pandemic-related restrictions.

“Today’s Tankan survey suggests that while the services sector is benefitting from the subsiding virus wave, the outlook for the manufacturing sector continues to worsen," said a report from Capital Economics. It noted it was the third consecutive decline in sentiment for the world's third largest economy.

The BOJ has kept interest rates below zero in a longstanding effort to encourage inflation and keep deflation at bay as the country ages and its population shrinks. That has kept the value of the yen weak relative to the U.S. dollar, which has been strengthening as the Federal Reserve raises rates to combat decades-high inflation.

The dollar was trading at 144.90 yen early Monday, up from 144.68 yen late Friday. That raised speculation that the central bank might once again intervene to prevent the yen from weakening further. The euro was at 97.59 cents, down from 97.96 cents.

The stunning and swift rise of the U.S. dollar against other currencies, meanwhile, raises the risk of creating so much stress that something cracks somewhere in global markets.

Elsewhere in Asia, Hong Kong's Hang Seng index fell 0.8% to 17,079.51. Australia's S&P/ASX 200 slipped 0.3% to 6,456.90. Taiwan's Taiex lost 0.9% and Bangkok's SET declined 1.8%.

On Friday, the S&P 500 fell 1.5%, while the Dow Jones Industrial Average dropped 1.7% and the Nasdaq composite slid 1.5%. All three declined by nearly 3% last week as the Dow slipped into what's considered bear territory, down more than 20% for the year.


Kurtenbach reported from Bangkok; Ott from Washington.

Elaine Kurtenbach And Matt Ott, The Associated Press

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