European markets close higher as UK performs major U-turn on tax cuts; British pound soars

The U.K. government's attempt to introduce a swathe of tax cuts, which it today almost fully backtracked on after sparking chaos in markets, has caused long-term damage to the economy, according to a leading think tank.

"The markets were extremely unhappy about what the previous chancellor had announced, I think the government was pretty much forced into this scale of change," Paul Johnson, director of the Institute for Fiscal Studies, told CNBC's Arabile Gumede.

"There's undoubtedly a long-term damage [to the economy] because there's been more uncertainty created, there's lack of stability in policy. What you've seen the current chancellor do is try to reassert that certainty and credibility, but once that credibility is lost, it's very hard to regain. And the government is going all-out to regain it at the moment," Johnson said.

— Jenni Reid

Shares of U.K. cybersecurity firm Darktrace rose 13.5% in afternoon trading, as food delivery company JustEat gained 9.5%.

Across European stock markets, all sectors were in positive territory at 3:00 p.m. London time. The major German and French indexes were both up around 2.1%, while the U.K.'s FTSE 100 rose 1.3%.

— Jenni Reid

The package of tax cuts announced by Liz Truss's government on Sept. 23, which was almost completely reversed this morning, was an experiment in trickle-down economics that couldn't have come at a worse time, according to KPMG's U.K. head of tax policy.

"It was just the way that it was done, the lack of clear costing, the fact that it was being done at a time when government finances are being stretched by the need to support consumers from energy [prices], and a time when global interest rates and gilt yields are rising," Tim Sarson told CNBC's "Squawk Box Europe."

— Jenni Reid

The yields on long-dated U.K. government bonds, known as gilts, have fallen during a statement delivered by British Finance Minister Jeremy Hunt.

The yield on 20-year gilts was down 42 basis points during the statement, dropping to 4.439%. 30-year index-linked gilt yields were down also down 42 basis points to 4.368%.

10-year gilt yields fell 32 basis points to trade around 3.997% just before Hunt spoke. Yields on 5-year and 2-year gilts also slid Monday.

— Hannah Ward-Glenton

British Finance Minister Jeremy Hunt has reversed most of Prime Minister Liz Truss's mini-budget policies.

"Almost all" of the tax measures announced will be scrapped, according to Hunt. The energy price guarantee will remain intact until April.

— Hannah Ward-Glenton

Shares in ITV are up 9.6% following a report by the Financial Times that it may be selling a stake in its production arm ITV Studios.

ITV Studios is one of the largest program producers in Europe and some analysts estimate it could be worth more than its parent company's £2.5 billion ($2.82 billion) market capitalization.

British investment platform Hargreaves Lansdown is down 4.4% following slowed earnings reports and news that CEO Chris Hill is stepping down. The company reported assets under administration fell during the first quarter of fiscal 2023.

The organization has also been hit by a multimillion pound lawsuit over the failure of one of its former fund managers, Neil Woodford.

— Hannah Ward-Glenton

The yields on long-dated U.K. government bonds, known as gilts, have fallen ahead of a fiscal statement by the new Finance Minister Jeremy Hunt expected later today.

10-year gilt yields fell 19 basis points to trade around 4.129%.

The yield on 20-year gilts was down around 15 basis points at market open, while 30-year index-linked gilt yields were down around 17 basis points.

Yields on 5-year and 2-year gilts also slid Monday.

— Hannah Ward-Glenton

Sterling rose on Monday morning in Asia following more policy reversals by the U.K. government late last week. The pound was last 0.56% higher at $1.1233.

Prime Minister Liz Truss canceled another tax-cutting plan, fired her Finance Minister Kwasi Kwarteng and named Jeremy Hunt as successor.

Over the weekend, Hunt told BBC that he will show the markets that the U.K. "can properly account for every penny of our tax and spending plans."

— Abigail Ng

Despite the volatility in markets, asset managers say it's important to remain invested if you're nearing retirement.

But how should one allocate funds, bearing in mind unsettled markets, a shorter investing horizon and the need for retirees to have some liquidity?

CNBC Pro asks the experts for their views.

Pro subscribers can read more here.

— Weizhen Tan

The People's Bank of China rolled over its medium-term lending facility (MLF) loans and kept its interest rate unchanged at 2.75%, according to a statement on its website.

The central bank announced it would keep the one-year rate unchanged for a second month and injected 500 billion yuan ($70 billion) through the MLF.

A Reuters poll expected no change to the MLF rate and a partial rollover of loans from the central bank.

—Jihye Lee

Stocks worldwide have taken a beating this year, and major indexes remain deep in negative territory.

As investors weigh whether to sell or stay invested, CNBC Pro screened almost 1,500 large and mid-cap global stocks and found a number of major companies with sell or underweight ratings.

CNBC Pro subscribers can read more here.

— Ganesh Rao

European markets are expected to open higher Thursday.

The U.K.'s FTSE 100 index is expected to open 32 points higher at 8,365, Germany's DAX up 25 points at 18,510, France's CAC 7 points higher at 8,143 and Italy's FTSE MIB up 59 points at 33,908, according to data from IG.

Earnings are due from Ferrovial, Telefonica, EDP, Enel, Pirelli and Salvatore Ferragamo.

— Holly Ellyatt

Morgan Stanley's U.S. equity team, led by Michelle Weaver and Mike Wilson, says there's a key risk to earnings on the horizon.

The investment bank named several stocks it believes will be most impacted in the next 3-6 months, and which could see downside to their share prices in the same period.

Pro subscribers can read more here.

— Zavier Ong