New PM needs to calm markets while his party fights like ferrets in a sack

Price borrowings fell on the news, which is good. But after the initial increase to $1.14 a pound it fell to just under $1.13 by the end of the day. The honeymoon period probably lasted less than a day. Further opinion about markets will come soon.

On the same day that the new Prime Minister took office after the previous Prime Minister had lasted 45 days, the popular Purchasing Managers’ Index was released, suggesting that the UK had already entered recession. Both services and production turned out to be in the red. This followed ONS data over the past few days showing that retail sales fell by 1.5% in September compared to August, while GDP fell by 0.3% in August alone. Also, mortgage lenders have now withdrawn mortgages for first-time buyers. A collapse in the housing market is inevitable. The recession will last for some time inflation which has already peaked, will fall sharply if the large base effects disappear.

All this is not good news.

Sunak has indeed warned, as I have in the pages of this newspaper, that Trussonomics will be a disaster and that it will not and will not work. It crashed the bond and foreign exchange markets, almost destroyed the UK pensions sector and led to mortgage firms abandoning their products because they couldn’t value them. All this in two working days. In the economy, a day is a lot of time.

The Tory Party is self-inflicted, and the futile attempt by Boris from the Dominican Republic has added to the feeling of a political party in freefall. The Tories are now so far behind in the polls that they will be annihilated in a general election. Sunak will have to pick up the pieces. He will also have to calm the markets by making sure his non-working party backs him and doesn’t fight like ferrets in a sack. Good luck with that.

The question is whether Sunak, who has been in the parliament for seven years and only two in the top post, can calm the nerves. He was caught up in Partygate and the issue of his wife’s non-speaking status caused difficulties. It appears that Truss has permanently ruled out a trade deal with the US.

Unfortunately, the experiment in infiltration economics irreversibly damaged Britain and made it difficult for Rishi to return to normal life. Trusonomics increased the cost of borrowing and the country’s reputation in the world, and lowered the outlook for the UK’s credit rating: this is the so-called “moron premium”. Why would companies invest in the UK when they see such a mess? All the poorer through the Tras.

Then who will be chancellor? It looks like Hunt, who clearly didn’t win, will keep his job. There are no other obvious contenders. How will he pay for energy price guarantees without taxing windfall profits from energy companies and perhaps even banks? Is he really going to go ahead with reckless spending cuts, given that Osborne has already cut spending to the bone? Will Hunt agree to triple lock pensions and allow pensions to rise with inflation? If he doesn’t, there will be a lot of disagreement.

During a recession, the correct course of action is to lower interest rates, increase government spending, and lower interest rates. It pulled the UK out of recession in 2009. This is what is needed now. It looks like Sunak, like Bailey and his BoE mates, is going to do the exact opposite.

The biggest worry for Sunac is that bond defenders will also come after him if the public finances collapse, as they do during a recession. Liz Truss may not be the only one having to make U-turns with a squealing handbrake, and anytime soon.