No, Rachel Reeves crying during Prime Minister's Questions isn't the political win you think it is
Thankfully, the times I have bawled until my face was a red-streaked and swollen mess have not been caught on camera for the world to see (I am a particularly ugly and colourful crier). So I genuinely felt for Rachel Reeves, who today was spotted puffy-eyed with a single tear rolling down her cheek, while sat behind Prime Minister Keir Starmer during today's Prime Minister's Questions, the day after the controversial welfare system reforms vote.
Reeves, the country's first female Chancellor, has recently been on the receiving end of criticism from colleagues, opposition parties and the public over a proposal to cut benefits and Personal Independence Payments (PIP) which help disabled people live a more independent life, as part of a much-needed benefits system overhaul. Elements of said plan is something the government has since been forced to u-turn on following backlash and the threat of a Labour rebellion.
Much furore has been made of Reeves's clear upset when Starmer sidestepped a question about her future during PMQs – and it's something the financial markets have apparently picked up on, too. At around midday (when PMQ's are broadcast) the value of the pound declined sharply against the dollar (though whether that's entirely down to Reeves's tears, or more linked to the suggestion that unpopular tax rises or a new Chancellor with a whole new economical plan could be waiting in the wings, is unclear).
What is clear, however, is the whiff of misogyny accompanying a lot of the commentary about Reeves online right now. There's a lot I find indefensible about this current Labour government – remember the halcyon days of last July when we actually thought change was afoot and things were going to get better? – but a politician showing emotion is not one.
It's a tired and well-worn (not to mention chauvinistic) trope that women are often 'too emotional' in the workplace, and that showing any sign of upset is to be considered weak and feeble. It's a reductive take – and we don't know with certainty what has upset her (a spokesperson for the Chancellor said it was 'a personal matter' and that Reeves will be 'working out of Downing Street this afternoon', implying she has not been ousted or used as a scapegoat). Frankly, a few tears are far less embarrassing than some of the frequent, angry outbursts we see from other politicians.
Donald Trump, for instance, regularly takes to his own social media platform, Truth Social, to get involved in spats with whoever has irked him that day, using language akin to an angry eight-year-old who has been told he's had enough screentime for the day, labelling former colleagues as 'losers' or any vaguely unflattering (and oftentimes honest) commentary about himself as 'fake news'.
Or take his Vice President, JD Vance, and his petulant outburst against Ukraine's President Volodymyr Zelenskyy in the White House earlier this year, during which he berated a man whose country is at war for his lack of wearing a suit. These are treated as popcorn-worthy entertainment, meme-ified and held up as the embodiment of 'power' and strongman politics – when really, it's just a tantrum for all to see. Somehow, though, I reckon Reeves will be judged more harshly.
I'm not saying crying at work is necessarily a good thing – if you find yourself dissolving into tears frequently and publicly, maybe it's time to accept that perhaps the job isn't for you. But what I am saying is, sure, there's plenty to attack Reeves over politically (seriously, those welfare reform plans and the threat to remove PIP payments were a mess) – but visibly showing emotion should not be one of them. If the markets are affected by a woman crying, then it's the markets that need to get a grip, not Rachel Reeves.
Kimberley Bond is a Multiplatform Writer for Harper's Bazaar, focusing on the arts, culture, careers and lifestyle. She previously worked as a Features Writer for Cosmopolitan UK, and has bylines at The Telegraph, The Independent and British Vogue among countless others.
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Interest rates ‘can be slashed' if Reeves forced into tax raid
The Bank of England could cut interest rates more than markets expect if Rachel Reeves puts up taxes in the autumn, economists have said. The Chancellor is widely expected to announce tax rises at the next Budget after U-turns on welfare reforms and winter fuel payments left her needing to find £6.5bn of savings. Economists at Deutsche Bank have warned the Chancellor could face a £32bn black hole in the public finances later this year. Government borrowing costs surged on Wednesday after Ms Reeves made a tearful appearance in the Commons, which raised concerns that she could be replaced with someone less committed to the Government's borrowing rules. The bond market turmoil subsided after Sir Keir Starmer gave his backing to the Chancellor, who today underlined her commitment to fiscal rules in her first public appearance since her emotional outing at Prime Minister's Questions. The Chancellor said her adherence to the Government's borrowing and spending rules 'has meant that we can boost investment in the public services'. Economists have warned keeping to the fiscal rules will mean Ms Reeves will be forced to raise taxes in the autumn to keep within her fiscal rules, after the Government's U-turn on its welfare reforms indicated it is politically too difficult to cut spending. Kallum Pickering of stockbroker Peel Hunt said another round of tax increases by the Chancellor would mean the Bank of England 'could go even further with rate cuts than it currently indicates'. Money markets imply that there will be around three more rate cuts by the Bank by April next year, which would take the Bank Rate from 4.25pc to 3.5pc. Mr Pickering said: 'Tax hikes would depress demand and inflation. 'Assuming inflation is roughly back to target next year, the Bank of England should be able to offset any demand-slowing tax increases with easier monetary policy – from a Bank Rate of 4.25pc it has a lot of headroom to cut. 'This story should become clearer over time as the temporary energy-related inflation hump fades and if the Government is indeed forced to significantly raise taxes.' London's stock market and the pound recovered today, having taken a knock Wednesday on rumours that Rachel Reeves could leave her job. The FTSE 100 rose 0.6pc, while the FTSE 250 rose 1.2pc, according to preliminary numbers. Thanks for joining us on this live blog today. You can continue reading our commentary and news on business and the economy here. The cost of government borrowing remains higher than Tuesday, despite reassurance from Downing Street that Rachel Reeves will remain in office. The yield on 10-year gilts has dropped today to 4.547pc, having closed yesterday at 4.612pc. But on Tuesday, before the Government's about turn on welfare became fully apparent, gilts were at 4.454pc. Bruna Skarica, chief UK economist at Morgan Stanley, told Bloomberg: 'The combination of low growth and high debt interest cost implies difficult fiscal choices. 'The UK has a very short lifespan of its fiscal rules. Hence, market participants see this as a live risk.' The S&P 500 and the Nasdaq touched fresh record highs this afternoon after a stronger-than-expected jobs report pointed to a resilient labour market amid concerns about Donald Trump's tariff policies. Nvidia was trading at a record high, up as much as 2.4pc, and is nearing a $4 trillion (£2.9 trillion) valuation. Data showed non-farm payrolls increased by 147,000 jobs last month after a 144,000 advance in May. Unemployment fell to 4.1pc last month, against expectations of a rise to 4.3pc. 'We were all expecting the hard data would start to show some cracks, and we really haven't seen that with the jobs report coming in much better than expected,' said Brian Klimke, chief market strategist at Cetera Investment Management. 'That just puts the Fed on pause and gives it more time to wait right now because the labour market is really resilient.' Wall Street remained high this afternoon after encouraging new figures for the US services sector were released. Economic activity in the services sector grew last month after a single month of contraction, according to data from the Institute for Supply Management. The services purchasing managers index hit 50.8pc, above the 50pc break-even point for 11th time in the last 12 months. Thomas Ryan, of Capital Economics, said: 'The rebound in the ISM services index in June is broadly consistent with our view that economic growth will slow rather than collapse in the second half of the year.' Since Wall Street opened this afternoon, the Dow and Nasdaq have risen 0.9pc, while the S&P has gained 0.8pc, after jobs data was released earlier. Stock markets around the world are surging after the better than expected US jobs figures – and it has put one of Wall Street's tech darlings on course for a massive milestone. Semiconductor giant Nvidia is now less than $100bn away from becoming the first company in the world to have a $4 trillion market capitalisation. The Nasdaq Composite in New York was up 0.9pc while the S&P 500 and Dow Jones Industrial Average have gained 0.7pc, even though the US employment increase means a Federal Reserve interest rate cut has been all but ruled out for July. Wall Street's gains have lifted global markets, with the FTSE 100 up 0.5pc and the mid-cap FTSE 250 gaining 1.1pc. Left-wing Labour MPs will push up the cost of government borrowing, analysts have warned, amid fears they have 'increasing control' over public spending levels. UK gilt yields have staged a recovery today from the sharp surge on Wednesday, when traders were concerned that Rachel Reeves could be replaced with a chancellor less committed to her 'ironclad' fiscal rules. However, yields remain higher than they were before the government's U-turn on its benefits bill, which is expected to give the Chancellor a £5bn headache as she tries to balance the nation's books. Kathleen Brooks, research director at XTB, said a 'risk premium has been attached to UK bonds, which is likely to remain until the Autumn Budget'. She said: 'The premium this time is linked to Labour's left having increasing control over Kier Starmer and pushing him for ever greater levels of public spending. 'If the Government wants to avoid an embarrassing and devastating fiscal crisis, they need the guts to cut public spending to more reasonable levels. The bond vigilantes are circling, and Labour could be forced to U-turn on the U-turns.' The cost of borrowing in the US lurched higher after stronger than forecast jobs figures all but wiped out the chances of a cut to interest rates in July. The US 10-year Treasury yield rose six basis points to 4.33pc, the fastest rise for any major sovereign debt today. It also reduced some of the rally in UK gilts, which had been staging a recovery after the turmoil caused by Rachel Reeves's emotional appearance in the Commons on Wednesday. Some economists expressed surprise at how the jobs figures had been received by the market. Samuel Tombs of Pantheon Macroeconomics pointed to the fact most of the increase in US nonfarm payrolls was down to jumps in state government and health care employment: Wall Street jumped to fresh record highs at the opening bell after stronger than expected US jobs figures. The S&P 500 jumped 0.4pc to 6,254.49 while the tech heavy Nasdaq Composite rose 0.6pc to 20,514.88 after both closing at record highs on Wednesday. The Dow Jones Industrial Average rose 0.3pc to 44,623.11. The US economy added more jobs than expected amid rising state government and health care employment, official figures show. Employment in state government increased by 47,000 in June, largely in education, according to the Labor Department, while health care added 39,000 jobs. The White House tweeted 'trust in Trump' and hailed the 'Trump effect' as non-farm payrolls increased by 147,000 in June, well ahead of expectations of 106,000. Yet Bradley Saunders of Capital Economics said the data showed 'the increasing narrowness of the labour market's strength'. Market commentators appear unanimous that the stronger than expected US jobs figures have killed any chances of an interest rate cut by the Federal Reserve later this month. There has been no word yet from Donald Trump after the stronger than expected US jobs figures, which have weakened the case for the interest rate cuts he has been urging the Federal Reserve to deliver. The US president said on his Truth Social account on Wednesday that he wanted Fed chair Jerome Powell to quit, suggesting he was too late to cut interest rates. Lindsay James, a strategist at wealth manager Quilter, said: 'As has been a theme for some time now, the US economy continues to confound expectations, with the labour market adding 147,000 jobs in June, well above consensus expectations and recent averages. 'Furthermore, the unemployment rate fell to 4.1pc, suggesting that the US economy remains in robust shape.' He added: 'With the end of the 90-day pause in reciprocal tariffs ending next week, it was thought that the slowdown was under way. 'However, for now this seems to be far from the case. These job numbers will get far more attention than usual too because investors are watching for any sign that the labour market is beginning to weaken sufficiently to trigger an interest rate cut in July. 'Despite negative GDP growth in the first quarter and data suggesting the US is beginning to experience the pricing impacts of the tariff policy, this is yet to feed into the wider economy and the jobs market continues to grind away. 'Ultimately, this gives Jerome Powell and the Federal Reserve the cover it will want to hold rates at the next meeting.' UK borrowing costs rose after stronger than expected US employment figures forced traders to scrap bets on the Federal Reserve cutting interest rates this month. The yield on 10-year UK gilts – a benchmark for the cost of servicing Britain's national debt – spiked after US non-farm payrolls grew by 147,000 in June, well ahead of analyst forecasts for 106,000. Derivatives traders rapidly rearranged their positions to leave the chances of a Fed rate cut in July at just 5pc, compared to 25pc before the figures were published. While UK borrowing costs are still down on the day overall, the 10-year gilt yield climbed three basis points after the data to 4.56pc. The yield had stood at 4.45pc at the end of trading on Tuesday before concerns over Rachel Reeves's position sent them surging as high as 4.61pc. The US economy added more jobs than expected last month, official figures show, weakening the case for interest rate cuts despite concerns that Donald Trump's tariff onslaught could impact hiring. Non-farm payrolls grew by 147,000 in June, according to the Labor Department, up from an upwardly revised 144,000 in May. It was well ahead of economist expectations for just 106,000 jobs to be added to the economy. The unemployment rate fell from 4.2pc to 4.1pc while average annual earnings slipped from 3.9pc to 3.7pc. Mortgage demand from home buyers is expected to soften over the summer, according to a Bank of England survey of lenders amid warnings borrowers 'are finding it harder to repay'. Lenders reported that demand for mortgages for house purchase had increased in the past few months but was expected to decline over the three months to the end of August. Home buying costs became more expensive for some buyers from April, as stamp duty discounts became less generous. Stamp duty applies in England and Northern Ireland. It comes as the Bank of England is predicted on money markets to cut rates two more times before the end of the year. Ken James of broker Contractor Mortgage Services said: 'The figures are a sign that some borrowers are finding it harder to repay, even though we have seen a strong appetite to lend and credit becomes more available. 'While default rates remained stable, the share of money lenders fail to recover when a borrower default saw a slight increase. 'Lenders anticipate this will continue rising in the coming months, reflecting ongoing financial pressure on households. The fact that losses are expected to increase shows the pressure many households are under.' The pound remained steady in the wake of the turmoil caused by the brief uncertainty over Rachel Reeves's future. That could all change when the official US jobs figures are unveiled in less than an hour. The dollar remained close to three-and-a-half year lows against major currencies ahead of the non-farm payrolls numbers, which are expected to show the US economy added 106,000 jobs last month. A big miss could change the outlook for interest rates, as Donald Trump continues to pile pressure on policymakers at the Federal Reserve to cut borrowing costs. Sterling was up last up 0.1pc at $1.366, while the FTSE 100 was 0.5pc higher. On Wall Street, stock indexes were tentatively higher in premarket trading after the S&P 500 and Nasdaq closed at record highs on Wednesday. The Dow Jones Industrial Average, S&P 500 and Nasdaq 100 were all up 0.1pc ahead of the opening bell. Bond traders have said the turmoil in financial markets shows traders actually want Rachel Reeves to stay in post as chancellor. Mike Riddell, fixed income portfolio manager at Fidelity International, said: 'The conclusion from financial market price action yesterday afternoon is that the market actually likes Rachel Reeves. 'Of course it may not be about Reeves specifically, but the market pricing in uncertainty regarding a potential change in future policy. 'Ultimately, Reeves leaving might be bad news for UK borrowing costs if fiscal rules are changed or ditched, since it implies even bigger deficits and issuance. 'But that's not the only outcome. If the UK does get a new chancellor, it could be someone at least as fiscally conservative, so may not be bad news necessarily from a market perspective.' Sir Keir Starmer would trigger a fresh sell-off in the pound if he were to sack Rachel Reeves as chancellor, economists have warned. Diana Iovanel of Capital Economics said investors view Ms Reeves as 'fiscally prudent relative to potential alternatives'. She said the sharp sell-off in the pound and UK bonds on Wednesday was 'driven not by a loss of confidence in her but by speculation that she'll be replaced'. She said: 'All that suggests to us that if Reeves was replaced it would probably spark a renewed gilt-sterling selloff, rather than a recovery. 'It also suggests that, as long as the Chancellor retains her job, some of the recent risk premia in UK markets will probably continue to fade.' Rachel Reeves said her commitment to her fiscal rules would allow more investment as she has appeared in public for the first time since her tearful outing at Prime Minister's Questions. Borrowing costs fell today after Sir Keir Starmer gave his backing to the Chancellor following turmoil on bond markets caused by concerns that he could replace Ms Reeves with someone less committed to steadying the public finances. In a public show of unity, the Chancellor appeared alongside the Prime Minister and Health Secretary Wes Streeting at a health centre in London. The latter praised her setting aside £29bn for investment in the health service in her spending review. She said: 'I want to be clear, we are spending money on taxpayers' priorities, but that wouldn't have been possible without the measures that we took in the budget last year. 'We fixed the foundations and we've put our economy back on a strong footing. 'Our commitment to the fiscal rules has meant that we can boost investment in the public services.' She went on to say the Government was 'making this country fairer for those who have paid in all their lives by guaranteeing that the NHS will be there when they need it'. Ms Reeves added: 'This is the right way forward, good for the health of our nation and good for the health of our nation's finances. 'This Government will always deliver on the priorities of ordinary working people, and I am proud that with this plan the NHS will always be there for those who need it for the next 77 years, and many more beyond that too.' The UK bond market has become more sensitive to potential shocks as pension funds and the Bank of England have reduced their exposure to gilts, a broker has warned. Lower liquidity in markets tends to cause bigger swings in asset prices. Gilt yields - a measure of government borrowing costs – surged higher on Wednesday amid concerns that Rachel Reeves could be replaced as Chancellor with someone less likely to adhere to her fiscal rules. Darius McDermott, managing director at Chelsea Financial Services, said: 'It's fair to say the UK gilt market is more sensitive than US Treasuries, and there are structural reasons for that. 'The gilt market lacks the same depth and liquidity, and two of the largest historical buyers – pension funds and the Bank of England – have stepped back in recent years, leaving a gap in demand. Long-dated gilts, in particular, now look riskier given the UK's fiscal trajectory. 'That said, the US isn't immune either. Trump's climbdown on tariffs was a result of the bond market's reaction, not the equity markets. And, despite the rhetoric, Trump understands he cannot fire Powell even if it was within his power, as the market consequences would be severe. 'But in the UK, with a shallower market and limited long-term demand, any signal of political or fiscal uncertainty – especially around the Chancellor – gets amplified quickly. 'Investors are understandably cautious. More borrowing and higher inflation are real risks. With a relatively flat yield curve, it's no surprise many prefer to sit in shorter-dated debt for now.' Housebuilding stocks recovered on the FTSE 100 as the Prime Minister gave his backing to the Chancellor. Bond yields surged on Wednesday at the sharpest pace since April, hurting interest rate-sensitive sectors like homebuilders and real estate. Berkeley and Persimmon dropped 8pc and 6pc respectively on Wednesday. Housebuilders rose as much as 2.2pc today across the FTSE 100 and FTSE 250 as gilt yields – a measure of borrowing costs – fell back as Sir Keir Starmer insisted Rachel Reeves's job was safe. Vistry was the biggest gainer, up 3.2pc, with Bellway and Crest Nicholson up 2.1pc. Britain's dominant services sector has cut jobs for nine consecutive months, a closely watched survey showed, after the Chancellor raised taxes on employers. Private sector companies cut jobs at a faster pace than in May, according to the S&P Global UK Services PMI. However, the services industry grew overall at its fastest pace in 10 months despite shrinking export sales amid 'headwinds from US tariffs and geopolitical tensions'. Tim Moore, economics director at S&P Global, said: 'Concerns about elevated payroll costs meant that service providers were reluctant to turn on the hiring taps. 'Employment numbers decreased for the ninth month running and at a faster pace than in May, with job shedding again often attributed to redundancies as well as the non-replacement of voluntary leavers. He added: 'A combination of easing price pressures and lower employment leaves the door open for the Bank of England to resume its run of interest rate cuts at the next policy meeting in August.' The Bank of England could cut interest rates more than the market expects if Rachel Reeves puts up taxes in the autumn, economists have said. Kallum Pickering of stockbroker Peel Hunt said another round of tax increases would mean policymakers 'could go even further with rate cuts than it currently indicates'. Money markets imply that there will be around three more rate cuts by the Bank by April next year, which would take the Banks Rate from 4.25pc to 3.5pc. Mr Pickering said: 'Tax hikes would depress demand and inflation. 'Assuming inflation is roughly back to target next year, the Bank of England should be able to offset any demand-slowing tax increases with easier monetary policy – from a Bank Rate of 4.25pc it has a lot of headroom to cut. 'This story should become clearer over time as the temporary energy-related inflation hump fades and if the Government is indeed forced to significantly raise taxes.' UK borrowing costs will rise further as the U-turn on the benefits bill raises questions about the Government's ability to 'take hard decisions', bond investors have warned. Gilt yields – a benchmark for the cost of servicing the national debt – have recovered some ground today after Sir Keir Starmer gave his firm backing to Rachel Reeves. Borrowing costs had surged on Wednesday over concerns about the Chancellor's future. Mohit Kumar, chief Europe economist at Jefferies, warned that today's recovery was not expected to last. He said official estimates of UK growth were 'too optimistic' which would likely 'put a big fiscal hole in government finances'. He added: 'The latest u-turn on benefits bill has raised questions on the ability of the government to take hard decisions and bring down government spending. 'The other alternative is to raise taxes which looks like a distinct possibility on the upcoming budget. Problem is that tax raises hardly ever bring in the expected revenue and in many cases can be counterproductive.' He said he held a 'negative stance' on the outlook for gilts, adding he expected the Bank of England to cut interest rates at least twice this year and towards 3pc next year. Gilts have rallied further in early trading after the Prime Minister gave the Chancellor his backing. The 10-year yield – a benchmark for the cost of government borrowing – was down eight-basis points to 4.52pc, clawing back around half of surge on Wednesday. Longer-dated bonds had bigger moves, with the 30-year gilt yield down 10 basis points to 5.32pc. The pound has steadied after reassurances from Sir Keir Starmer over Rachel Reeves's future. Sterling was last up 0.1pc against the dollar at $1.366 as the Prime Minister told Virgin Radio the Government remains committed to the fiscal rules and economic stability. Darius McDermott, managing director at Chelsea Financial Services, said: 'Ironically, Rachel Reeves may have provoked her own 'Liz Truss moment'– not through policy excess, but through fears of what might follow her potential resignation.' He added: 'While Reeves' policies may be flawed, the real concern for investors is that her replacement could push the party further to the left at a time when markets are desperate for signs of credible fiscal leadership. 'Without a clear pivot towards tough decisions, the risk is this discomfort could spiral into a broader crisis of confidence in UK debt.' The cost of government borrowing dropped sharply at the start of bond market trading after Sir Keir Starmer committed to keeping Rachel Reeves as chancellor 'into the next election and for many years afterwards'. The yield on 10-year UK gilts – a benchmark for the cost of servicing the national debt – fell by six basis points to 4.55pc. However, the recovery was only partial, as borrowing costs remained higher than before the Chancellor's tearful appearance in the Commons on Wednesday. The 10-year yield surged 16 basis points higher after the Prime Minister initially failed to back her at the despatch box in one of the biggest moves since the mini-Budget crisis. Longer-term borrowing costs also eased, with the yield on 30-year gilts dropping by seven basis points to 5.35pc. The FTSE 100 jumped higher a day after questions over the Chancellor's future triggered turmoil in financial markets. The UK's flagship stock index climbed 0.4pc at the open to 8,812.05 a day after Rachel Reeves's tears in the Commons left it as the only major European index to lose ground. The mid-cap FTSE 250, which is more domestically-focused, also climbed 0.4pc to 21,534.56. On Wednesday it suffered its biggest daily decline since the Liberation Day turmoil in early April, dropping by 1.3pc. The slump in the pound despite surging borrowing costs was reminiscent of the Liz Truss-era meltdown in bond markets, analysts have said. The 10-year gilt yield – a benchmark for the cost of servicing the national debt – surged by nearly 16 basis points to 4.61pc on Wednesday, while 30-year yields climbed 19 basis points to 5.42pc. Deutsche Bank analyst Jim Reid said: 'Interestingly, the pound sterling slumped as well, which isn't what normally happens when longer-term interest rates are rising, as that should make the currency more attractive, other things equal. 'So that was reminiscent of the market patterns seen after Liz Truss, and the pound fell 0.8pc against the US dollar, making it the worst-performing G10 currency yesterday.' He added: 'Looking forward, the immediate issue is that the Government left a very narrow margin in March against their fiscal rules they set themselves. And since then, that margin has disappeared thanks to factors like the spending U-turns and the tariff announcements after Liberation Day. 'So unless we got a big burst of growth before the Budget, then the Government would need to announce further tax rises or spending cuts if they still want to meet the fiscal rules. So this leaves them in a tricky position. 'On tax, they've ruled out raising several large taxes like income tax and VAT, and the tax rises already announced generated unpopularity. On spending, they've come under intense pressure in response to the spending reductions so far, which have resulted in U-turns. 'And if they eased the fiscal rules, the fear would be a fresh market selloff like yesterday. So it's not obvious which way they turn.' Rachel Reeves's position as chancellor has been made more secure by the sharp reaction in bond markets to questions over her future. Will Walker-Arnott, a director at wealth manager Charles Stanley told BBC Radio 4's Today programme: 'This is a rare example of financial markets actually enhancing the career prospects of a politician. 'The markets were concerned that if the Chancellor goes then any fiscal discipline would follow her out the door and that would mean bigger deficits, more gilt issuance and so, obviously, gilt yields went up.' Investors will watch carefully what happens when trading opened on bond markets later after one of the worst performances since the Liz Truss mini-Budget crisis. Traders sold off UK gilts on Wednesday, sending the cost of government borrowing higher, amid concerns about the future of Chancellor Rachel Reeves. Christian Kopf, head of fixed income at asset manager Union Investment Group, told BBC Radio 4's Today programme: 'Often we see jitters in the bond market which is caused by external events but yesterday it was different. 'It was clearly caused by Prime Minister's Questions and by domestic events in the UK and the movement was very swift and very stark. 'It's about the future of the fiscal rule in the UK. Chancellor Reeves stands for that fiscal rule. Investors were growing concerned about the prospect of very high fiscal deficits that are no longer compliant with the fiscal rule and that would then give rise to higher yields and a weaker pound sterling. 'So people are really concerned about the consistency of economic policymaking in the UK.' Thanks for joining me. The value of the pound slipped further despite Sir Keir Starmer's assurances that Rachel Reeves will remain as Chancellor 'into the next election'. Sterling dropped nearly 1pc on Wednesday and government borrowing costs surged after the Chancellor shed tears in the Commons and the Prime Minister failed to back her when questioned at the depatch box. He later backed her but the pound and gilt yields – the return the government promises to buyers of its debt – failed to recover from one of the sharpest moves since the Liz Truss mini-Budget crisis. Mohamed El-Erian, chief economic adviser at Allianz, said: 'The concern in markets is that a new chancellor may not be as committed to the fiscal rules.' In early trading, the pound was last down around 0.1pc against the dollar at $1.364 and was 0.2pc lower versus the euro, which was worth 86.5p. Asked about Ms Reeves's emotional state on Wednesday, Sir Keir Starmer told the BBC: 'It was a personal matter for the Chancellor and I've been absolutely clear with you it has got nothing to do with politics, nothing to do with any discussion between me and Rachel, nothing to do with the matters of this week. 'She will be the Chancellor for a very long time to come. She is going to be the chancellor into the next election and for many years afterwards.' Here is what you need to know: Borrowing costs surge on speculation over Reeves's future | UK gilt yields soar as pound plunges after Prime Minister fails to back his Chancellor in Parliament Cash Isa raid 'will drive up mortgage costs' | Building societies warn over ability to raise funds for loans as Reeves's plans to cut tax-free threshold Microsoft to cut 9,000 jobs as chatbots take over | Tech giant sheds 4pc of workforce as executives order staff to hand tasks to AI Tesla sales hit three-year low as Musk feuds with Trump | Billionaire criticised president's bill that cuts incentives for electric cars Kathryn Porter: The Heathrow fire report is not just damning for National Grid | The regulator should be monitoring standards, not just issuing fines after things go wrong Asian shares were subdued as investors braced for a key US jobs report and waited on the passage of Donald Trump's tax cutting bill in Congress. Wall Street climbed overnight to close at new record highs after President Donald Trump announced that the US has struck a trade deal with Vietnam, including a 20pc tariff on exports to America. That is lower than the 46pc tariff that had been threatened, but still much higher than previous rates. Vietnamese shares gained 0.5pc to the highest since April 2022. The local dong currency, however, dipped to a record low of 26,229 per dollar. Japan's talks with the US struggled, while South Korea President Lee Jae Myung said tariff negotiations were looking difficult and he cannot say if talks can conclude by next Tuesday. Tokyo's Nikkei 225 inched up 0.1pc to 39,794.16. In South Korea, the Kospi added 1pc to 3,106.46, while Australia's S&P/ASX 200 was down 0.1pc to 8,589.30. The Hong Kong's Hang Seng index lost 1pc to 23,976.41. The Shanghai Composite index edged up 0.1pc to 3,57.36 as data showed China's services activity expanded at the slowest pace in nine months in June. On Wall Street, the Dow Jones Industrial Average closed flat, at 44,484.42, the S&P 500 rose 0.5pc, finishing at 6,227.42, and the Nasdaq rose 0.9pc, to 20,393.13. In the bond market, the yield on benchmark 10-year US Treasury notes rose to 4.284pc from 4.251pc on Tuesday night. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
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Watch: Labour's ‘total clusterf**k'
Play Video It wasn't supposed to be like this. Exactly a year ago the Labour government swept into office promising stability, competence and economic growth. So why, on the one year anniversary of their victory, does it feel like their dying days? This has been a pretty extraordinary week in British politics and it's a week that will leave its mark on the UK economy. Downing Street will hope to move on – that's how it works – their message calendar has had NHS written on today's date for months and it's the NHS they'll want to talk about – but none of us will forget what happened this week and no amount of government spin will gloss over it. The sight of the Chancellor, Rachel Reeves, sobbing in the House of Commons while the Prime Minister – just inches away from her – was on his feet defending their policies while pointedly failing to defend her – will endure in our political memory. I take no pleasure in the obvious distress of Rachel Reeves, whether the cause was 'personal' as No 10 insists or related to her job and the wider crisis facing the government. I won't join in any effort to mock or criticise the fact that she cried – but the strain she's under and the impossibly contradictory political and economic agendas pulling at her cannot be ignored. The government's week from hell began with a humiliating u-turn on their plans for welfare reform. Now, criticising governments for u-turning or abandoning unpopular policies can be overblown but there's no exaggerating the absurdity of what happened in the House of Commons on Tuesday night. Ministers held up their welfare reform plans as vital for the public finances but in fact the savings planned were tiny – a mere £5bn off a welfare bill touching £300bn a year. But it was a signal – to the markets and the rest of us – that they would and could take tough decisions to make their spending plans add up. When it came down to it, they couldn't get it over the line. Just 90 minutes before the vote ministers announced they were slicing out the money-saving elements. Rebel Labour MPs had demonstrated that they hold enormous power over the Prime Minister. It was a humiliation for Starmer up there with all those bruising Brexit defeats inflicted on Theresa May. So much for stability and competence. It was, in the words of one Labour MP, 'a total clusterfuck.' And that's one of the softer reactions. And of course, it leaves the Chancellor with a £5bn headache – money she will now have to find in spending cuts or tax rises – or borrowing. A has just been proven, spending cuts are not getting through this crop of Labour MPs and borrowing isn't an option if the government wants to maintain any fiscal credibility and so – as we at have been warning since the end of last year – tax rises are coming. No wonder the Chancellor was apparently overheard in the Commons – moments before she was seen crying – saying 'I'm just under so much pressure.' She is indeed. Because her plan – Starmer's plan – in as much as they had one – has not worked. The tax burden is at a record high and the growth rate is barely registering. Employment is down. Job vacancies are down. Business confidence is down. There's a reason why I've been banging this drum pretty much week in, week out – it's not just sport. It all points to what one top asset manager described yesterday as a 'hell slide' where the economy doesn't grow so the government's spending plans don't add up so they hike taxes to fill the hole and so the economy suffers yet more pain. And watching all of this, taking it all in, are the bond markets. Ten year gilt yields are at the same level now as they were at the height of the Liz Truss crisis. In fact, they've climbed steadily since Labour were elected. Now there are a variety of reasons for this and it's not unique to the UK but our political and economic conditions are contributing to a nervousness among investors – a nervousness that the UK might not be quite as politically stable as it appeared this time last year. A nervousness that this government will not be able to pass tough spending decisions. And that nervousness tipped over into panic yesterday – briefly – when it looked as if the government was about to lose its Chancellor. Now there are plenty of voices calling for a new Chancellor, but I'm not one of them. Indeed I said in an episode two months ago that we had better hope Reeves remains in office because – and this is what spooked markets yesterday – the only reason for getting rid of her would be to scrap or rewrite the fiscal rules on borrowing and spending – the only thing currently keeping bond markets at bay. Bond traders yesterday feared for a post-Reeves world. I don't like what this government – what this Chancellor – has done to our economy but we are stuck with her, at least – perversely – we'd better hope we're stuck with her because if she goes Starmer will be saying that his economic agenda has failed and, as this week shows, it's his MPs that are calling the shots and they are calling for tax rises and no further cuts to public spending. If they win that argument, it won't just be the bond markets that panic. So, happy birthday to the government. One year old today. At the dawn of the last era of Labour rule, in 1997, the party's anthem was Things Can Only Get Better. Today, all we can hope for is that they don't get any worse. Sign in to access your portfolio
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Government still reforming ‘utterly broken' welfare system
The Scottish Secretary has said the UK Government is still working to reform the 'utterly broken' welfare system, following the substantial concessions made in Parliament earlier this week. Ian Murray also said the Cabinet is in a 'resolved' mood following the tearful appearance of Chancellor Rachel Reeves in the House of Commons. Mr Murray, a former publican, visited Belhaven Brewery in East Lothian on Thursday – where he poured a pint which then had his face imprinted on the foam by a machine at the bar. Speaking almost a year on from Labour's general election win, Mr Murray said his party had achieved 'a lot', adding: 'We've had 30 Bills through Parliament, the most that have ever been passed in the history of a new government. 'We've given 200,000 Scots the biggest pay rise, we've been able to set up GB Energy, we've stabilised the economy.' On Tuesday, Sir Keir Starmer's Government was forced into a last-minute climbdown in order for welfare legislation to pass its first parliamentary hurdle. Ministers shelved plans to restrict eligibility for the personal independence payment (Pip), with any changes now only coming after a review of the benefit. These changes are expected to put pressure on other parts of the Government's finances. Mr Murray said 'everybody agrees' the welfare system needs reform and too many people are 'locked out of the workplace because of the way the welfare system works'. He said the Timms review would examine the Pip system and the Government is confident the 'journey' of reform would continue. Pressed on whether substantial parts of the reform had been dropped, he said: 'A thousand people a day are going into personal independence payments, that's 371,000 a year. 'That's completely unsustainable.' He added: 'This whole system is completely and utterly broken and it's unsustainable and that's what we're trying to resolve. 'The one thing that unites everybody in this debate is the fact they know the system is broken and it has to be reformed.' The Scottish Secretary was asked if the Chancellor's Budget choices would affect the devolved Scottish Government budget, with Mr Murray noting the Spending Review had given Edinburgh a further £9.1 billion over two years. He said: 'The Budget will be set in October as it is in any budget. 'Of course, with things fluctuating so quickly, we wouldn't speculate now what would happen then, because things can change so quickly. 'But we've already said there'd be no change to the Scottish Government's budget.' Mr Murray said the mood in Cabinet is 'one of resolve' following Ms Reeves' appearance in the Commons and markets had responded positively to the Prime Minister's show of support in her.
