Today’s markets: Miners give the FTSE some support

Rachel Reeves’ “growth is the challenge and investment is the solution” chant echoed through yesterday’s speech. If only it were that straightforward for our new chancellor. It does at least seem to open the path for more borrowing – for investment that is, as day‑to‑day spending doesn’t count. Current fiscal rules are kinda stupid – even if the pledge to balance the budget excludes investment, Labour is still hamstrung to bring down net debt as a share of GDP between years four and five of the forecasts. This creates what plenty of clever people think leads to an inbuilt bias against investment.

In short, spending more on ‘investment’ is not necessarily a bad plan. It’s just a) hugely dependent on what you spend it on – what are your priorities, because returns on investment vary a lot? And b) it’s also quite funny that it’s partly what Truss wanted to do. It’s all about the message – Labour has worked enormously hard to seem credible to markets in order to get to this point. Where Truss rushed in, Reeves has feared to tread. Until now, maybe.

 Meanwhile, PM Starmer is talking tough on sickness benefits claimants. Get on yer bike, he’s basically saying. It is fascinating to see a new government expend so much political capital early on taking ‘tough decisions’ – ie, unpopular ones. The plan is to give it credibility in the market and also to sow the seeds of growth that will yield fruit four years from now. It’s just not what we are used to! Sterling advanced to its highest level against the US dollar since March 2022, with cable reaching 1.3427. That was probably more to do with Federal Reserve/Bank of England (BoE) divergence than anything else – BoE governor Andrew Bailey emphasised the gradual approach to easing in an interview yesterday.

European stock markets rallied on Tuesday off the back of the China stimulus bazooka, but are in a giveback mode this morning. The Dax shed about half a per cent from a record high, the Cac made similar losses, while the FTSE 100 shed about 0.2 per cent early doors. But broader losses were capped and the FTSE was in positive territory by mid‑morning as miners were still on the front foot. Iron ore hit a three-week high. Crude oil pulled back with other risk assets after hitting a three-week high on Tuesday following the People’s Bank of China moves. Copper also handed back some gains after it rallied to its best level since the middle of July. US futures were a bit lighter after the S&P 500 hit a record high again yesterday.

Gold made another high overnight – there’s still a relentless trade here. Will there be an extension to $2,725? Either way, it’s on course to snap its usual September losing‑streak.