Pound jumps after UK tax cut rescinded, oil climbs higher

TOKYO, Oct 3 (Reuters) – Oil surged on Monday as OPEC+ considered cutting output at its meeting later this week, while the pound appreciated after the British government announced it would would undo a controversial tax cut that had rocked UK markets.

Asian stocks mostly fell over the holidays, although Japanese markets found support from strong energy and semiconductor stocks.

The pound jumped in early London trade after the UK government announced its intention to reverse the proposed removal of the higher income tax rate which sparked a backlash from within the ruling Conservative Party .

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

“From a market perspective, this is a good step in the right direction. It will take time for markets to accept the message, but it should ease the pressure,” said Jan Von Gerich, chief analyst at Nordea.

“Questions remain and the pound is likely to remain under pressure.”

Outside of Japan, stocks fell in Asia. MSCI’s broadest non-Japan Asia-Pacific equity index (.MIAPJ0000PUS) fell 1.04%, en route to its fourth straight session of losses. It fell almost 14% in the last quarter.

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

The Japanese Nikkei 225 (.N225) rose 0.50%, with energy stocks leading the gains on the index and upbeat quarterly earnings from Mimasu Semiconductor (8155.T) boosting chip stocks.

Minutes from the Bank of Japan’s September meeting were also released on Monday, showing members debated whether inflation could beat expectations under the bank’s ultra-loose monetary policy, which ultimately remained unchanged.

“Some participants suggested the BoJ should watch closely whether recent cost pressures will lead to a virtuous cycle of higher wages,” JPMorgan researcher Ayako Fujita wrote in a note. “We believe this has confirmed that wage developments are the key condition for the BoJ to change its policy.”

The yen briefly fell to 145.4 to the US dollar despite remarks this morning from Japanese Finance Minister Shunichi Suzuki that the government would take “decisive action” to prevent sudden currency moves.

It was the first time the yen broke the 145 barrier since Sept. 22, when the finance ministry stepped in to support the currency, which hit a 24-year low against the dollar this year. He then pared his losses and finished last at 144.86.

In Australia, where some states observe a public holiday, the S&P/ASX 200 Index (.AXJO) fell 0.27%.

The Hong Kong Hang Seng Index (.HSI) fell 1.75%.

South Korea had a public 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%.

Investors’ attention will later turn to the US ISM manufacturing index for September.

“The ISM manufacturing is unlikely to shake the optimism around the US economy which has strengthened further with the positive economic indicators released over the past few weeks,” wrote Saxo Bank market strategist Redmond. Wong, in a research note.

The Reserve Bank of Australia meets on Tuesday as markets widely expect another 50 basis point rate hike while Japan’s consumer price index is expected to show further acceleration in inflation.

Spot gold rose 0.27% to $1,664.0900 an ounce.

Major cryptocurrency Bitcoin fell 1.48% to $19,137.

Reporting by Sam Byford; Additional reporting by London and Asia markets teams; Editing by Sam Holmes

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