Market Loop - 💸Markets bet on November rate rise

ECONOMY
Markets bet on November rate rise 

What’s going on?
Investors have increased their expectations that the Bank of England will raise interest rates as early as next month after the governor said it was ready to act to bring rising inflation under control.

Why is this important?

Interest rates and rising inflation has been the hot topic of conversation among investors, analysts and economists in recent months.

For most of this year central banks, including the Bank of England and US Federal Reserve, held the view that inflation would be temporary and settle down once global supply chain issues and rising energy costs resolved themselves.

Policymakers are nervous that pulling the trigger too soon and raising borrowing costs could derail the economic recovery from Covid. 

UK inflation is at 3.2%, over the target of 2%, with new figures are due out tomorrow.

Over the weekend the governor of the Bank of England gave the strongest hint yet that rates would have to rise to control rising inflation driven by higher fuel costs.
 
Investors now think there is a 90% chance that the Bank rate will be increased from 0.1% to 0.25% as soon as next month.

The yield, or interest rate, on the UK’s two-year government bonds or IOUs jumped to its highest level since May 2019 as traders anticipated a rate rise.

Yields rise when bond prices fall. Rising yields suggest investors are pricing in higher interest rates, from their current record low, to curb inflation

Takeaway
Rising interest rates will be new territory for many Brits. There are around 10m people in the UK who haven’t seen rates above 1% in their adult lives. Higher rates will have knock on impacts for those seeking mortgages and for those already on variable deals, the monthly costs could increase sharply.

LEISURE
Gambling firm shares rocket on £3bn take over

British gambling platform Playtech saw its shares surge nearly 60% yesterday after Australian slot-machine maker Aristocrat agreed to buy it in a deal worth £2.7bn.

Playtech generates revenue by selling the software used to operate casinos and online gambling sites to betting companies. Aristocrat wants to capitalise on this large and fast growing sector estimated to be worth $70bn globally.

The deal will create one of the largest business-to-business platform providers in the global gaming industry.

It comes after a flurry of takeover bids for British gambling companies, seen by many as the best in the world.

American bookmakers especially are looking to expand internationally and acquire the expertise of British firms as America opens up to sports betting. William Hill has already been sold to US owners for £3bn this year and Ladbrokes-owner Entain received a £13bn offer from US rival Draftkings last month.