The Bank of England, it seems, really did mean it when it said it would start selling gilts under its quantitative tightening, or QT, programme at the end of the month. OK, there will be a delay of a day because of the central banking equivalent of a TV scheduling clash – the chancellor will deliver his full medium-term fiscal plan on 31 October. But Threadneedle Street says it intends to press the QT button on 1 November.
One can understand, of course, the desire to crack on with the job, since there has already been one postponement. That occurred on 28 September when the Bank was diverted by Kwasi Kwarteng’s disastrous mini-budget. Gilt yields surged, causing chaos for pension funds and creating a threat to UK financial stability. The Bank was bounced into becoming a temporary buyer of gilts – to the tune of £19bn – instead of a seller.
The promise to get back to plan A at Halloween sounded more like a hope than an expectation at the time, and one cannot call it risk-free today. It is surely premature to sound the all-clear in the gilts market just because Jeremy Hunt slayed Trussonomics in a weekend. Tuesday’s 4.3% yield on the 30-year gilt is a lot better than the 5.1% at the height of the crisis, but the rate was 3.8% before Kwarteng’s fiscal event. If there is an appearance of calm, it is of the uneasy variety.
Hunt’s end-of-the-month announcement is, potentially, a market-moving event. One key question is whether investors judge his spending cuts to be credible. This time there will (finally) be numbers from the Office for Budget Responsibility to frame thinking, but there is no guarantee that the whole thing will pass off smoothly. In pitching up with the first QT sale the following day, the Bank is adding an unnecessary risk.
Yes, it would have been mildly embarrassing to announce a longer delay. But it would also be the safety-first approach. Minimise the risk of more explosions.
CMA earns a handclap gif
Consider it a triumph for a plucky UK competition regulator against the massed legal battalions of a Silicon Valley giant. The Competition and Markets Authority (CMA) will force Meta, the owner of Facebook, to sell Giphy in an unusual case in which a UK body was objecting to one US company buying another.
At one level, the scrap was wholly trivial because gifs, Giphy’s stock in trade, are the nonsense animations of online meme peddlers and are going out of fashion fast. Yet there was a serious competition point at the heart of it: how much control over the £7bn UK display advertising market should one company be allowed?
With Giphy onboard, said the CMA, Meta would be able to increase its “already significant market power” by cutting off the supply of gifs to rivals, or it could demand more data on users. Plus, Meta had binned Giphy’s advertising offer to corporates in the US after buying the business for $400m (£290m) in 2020, so a possible parallel UK launch was quashed before it could emerge.
In an early round of this tussle, Meta collected a £50.5m fine for breaching the CMA’s “initial enforcement order” – in effect, an instruction not to prejudice the outcome by integrating operations. Now it will have to wave goodbye to Giphy. True, it is hardly a gamechanger; Mark Zuckerberg and his underlings will be mildly irritated. But one can still applaud the implied message that UK regulators are prepared to take up hard cases in a global social media industry. So they should, but they haven’t always in the past.
The first crime committed by THG was against the English language. “QIA is an existing shareholder, having cornerstoned THG’s initial public offering …” said the online retailer, inventing verbs that should not be invented.
The second was against common sense. The purchase of shares by QIA, or the Qatar Investment Authority, “is a positive endorsement for the UK as a whole”, claimed its chief executive, Matthew Moulding. Come on, the sovereign fund is buying from SoftBank of Japan, which is crystallising a thumping loss of £450m having once been billed by THG as its great partner in online adventures. You could equally say SoftBank’s exit is a vote of no confidence in the UK.
In fact, both interpretations would be wide of the mark. Two foreign investors just have different views on THG, an oddball beauty and nutrition business with a share price that has crashed by 90% since 2020’s over-hyped flotation. THG is not UK plc, thankfully.