Prime Minister Boris Johnson is set to announce a social care plan that risks the ire of his Tory colleagues as it will potentially include a tax rise. The proposed £10 billion tax hike will likely hit young people the hardest and will go against the 2019 election manifesto pledge not to do so. The government had on Monday announced a £5.4 billion package over the next six months for the NHS. The pound closed weaker at $1.3871 while yield on 10Y UKTs was lower at 0.694%.
Asian markets were mostly higher on Tuesday with Chinese August exports beating expectations – 25.6% YoY growth vs expected 17.1%. Japanese data was equally encouraging with government wages up 1% YoY spurring the NIKKEI to continue its recent strong showing. The NIKKEI rose 0.86% while the CSI and the HANG SENG were trading 1.20% and 0.88% up respectively towards the end of the session. The ASX just managed to claw back into the green, closing 0.02% up, as the RBA reduced its weekly bond purchases to A$4 billion from A$5 billion previously; the review of the programme was pushed back to February 2022 from the originally planned November 2021.
President Jair Bolsonaro stepped up his criticism of public institutions pushing political tensions higher ahead of the 2022 elections. The increase in energy costs last week will also do little in the fight to contain inflation which hit 9.30% YoY mid-August. The latest central bank survey consequently saw economists push the end-2021 inflation forecast to 7.58%, the 22nd straight week the forecast has been upped. The real closed firmer at 5.1699 to the dollar while yield on BRAZIL 30s was lower at 3.758%.
Turkey raised its end-2021 inflation target to 16.2% from a previous 14.1% in the new three-year economic programme. The move came as August inflation rose to 19.25% YoY pushing real rates into negative territory for the first time since October 2020. The move just about ensures that rate cuts will likely be pushed back for a while, dealing a blow to President Erdogan’s call for easing. The lira closed firmer at 8.2823 to the dollar while TURKEY 31s were about flat, trading about 5.99%.