FirstFT: UK faces ‘profound economic crisis’, says Sunak

Rishi Sunak yesterday became Britain’s third prime minister in the space of two months and immediately started to assemble a “unity cabinet” to tackle “the profound economic crisis” facing the country.

Sunak, who was invited by King Charles to form a government yesterday morning, said he would prioritise “economic stability and confidence” but said: “This will mean difficult decisions to come.”

Jeremy Hunt, the man charged with clearing up the economic mess left by Liz Truss’s calamitous 49-day premiership, will remain as chancellor and present a debt-cutting plan in the coming days.

In an attempt to stabilise the governing Conservative party after months of chaos, Sunak retained a number of senior ministers who had backed an abortive comeback bid by former prime minister Boris Johnson. They include Suella Braverman for home secretary and James Cleverly for foreign secretary.

In contrast to Johnson’s shambolic administration, Sunak promised: “This government will have integrity, professionalism and accountability at every level.”

Thanks for reading FirstFT Europe/Africa. Here’s the rest of the news — Gary

Five more stories in the news

1. Weak pound adds billions to company dividends Investors in UK companies can expect to receive an additional £5.7bn of dividends this year because of the pound’s slide against the US dollar. The UK currency hit a record low against the dollar last month, and even after recovering, it is still down 15 per cent this year.

2. Alphabet slowdown leads to tech sell-off Google’s parent company reported a severe slowdown in its core search ads business, leading to lower-than-expected revenue growth in the third quarter. The earnings result prompted a sell-off in tech stocks and fanned fears of an economic slowdown in the US.

3. Italian bank fundraising attracts ‘state aid’ scrutiny Brussels officials are concerned that a €2.5bn fundraising at Monte dei Paschi di Siena, the world’s oldest bank, could constitute illegal state aid. The Italian treasury is buying 64 per cent of the shares in the capital raise, but under EU rules the state can only take part if all investors are subject to the same conditions.

4. First bitcoin ETF loses record amount in initial year Asset manager ProShares’ Bitcoin Strategy fund had the most successful ETF launch in history when it amassed more than $1bn in its first week of trading in October 2021. One year later, it has lost more of investors’ dollars than any other ETF debut.

5. Wall Street banks clash over EM equities outlook Morgan Stanley and Goldman Sachs have taken diametrically opposed views on emerging market stocks after a punishing $2tn sell-off this year. An MSCI index of EM stocks has slumped about 30 per cent since early January, reflecting a punishing decline in markets ranging from China to South Korea.

The day ahead

Economic data Russia releases industrial output figures, the UK publishes employee earnings data and France has consumer confidence results for October.

Biden welcomes Israel’s president US president Joe Biden will host Israeli president Isaac Herzog at the White House a week before Israel holds elections. (Politico)

German chancellor and French president meet in Paris Olaf Scholz and Emmanuel Macron will aim to calm rising Franco-German tensions after Macron said at last week’s EU summit that Berlin risked “isolating itself” in Europe.

Earnings The torrent of corporate earnings continues today with Banco Santander, Barclays, Bloomsbury Publishing, Boeing, Deutsche Bank, Ford Motor Company, Harley-Davidson, Heathrow airport, Heineken, Kraft Heinz Company, Mercedes-Benz, Meta, Puma, Standard Chartered, Telenor, Thales, UniCredit and more set to report. See the full list here.

Raindance Film Festival The UK’s largest independent film festival begins today.

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What else we’re reading

Investors hunt for biotech bargains The Covid generation of newly public biotechs entered the industry’s worst bear market since the 2000s after valuations soared during the pandemic and then came crashing down. But now, a gap is opening up between the more robust companies and the rest.

How Bolsonaro built a durable rightwing movement With Brazilians heading to the polls on Sunday, incumbent president Jair Bolsonaro is closing the gap on favourite Luiz Inácio Lula da Silva. Whether he wins or loses, Bolsonaro has forged a durable rightwing movement that blends Brazilian conservatism and nationalism with American-style culture war politics and social media battles.

Pakistan seeks ‘justice’ after floods When the Indus river burst its banks during heavy rains and flash flooding in late August, the disaster put the country at the forefront of an international debate about how to pay for adaptation to the ravages of global warming — and who should pick up the bill.

China’s limitless presidency means limited diplomacy While Xi Jinping seems unassailable at home, foreign diplomacy will only become more difficult, writes Yuan Yang. If all policy ultimately originates with the leader, and if he is infallible, then there can be no admission of mistakes, no apologies, no compromises — in short, no diplomacy.

Why Sony wants to win over Tesla Despite a hyped tie-up between the entertainment giant and Honda to develop an electric vehicle, the deal won’t deter Sony from selling its camera sensors to Tesla. The success of this arrangement will hinge on whether it can convince the US carmaker that its image sensors are good enough, writes Kana Inagaki.

Style

The problem with men’s trousers is that they rarely fit. The FT’s Rob Armstrong shares his top tips and the three deadly sins to avoid in the search for pants that are both comfortable and look good.