LIVE MARKETS-A bullish inflection point for UK assets?

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A BULLISH INFLECTION POINT FOR UK ASSETS?

British Prime Minister Andy Burnham delivered a speech yesterday that Gavekal chief economist Anatole Kaletsky believes could mark a turning point for British assets.

"It showed an openness to possible U-turns in fiscal policy, EU relations and electoral reform," writes Kaletsky, who believes acknowledging and fixing these issues could act as a catalyst for a turnaround in Britain's economic and financial performance.

"My bias is to view this speech as a pivotal moment for the UK economy and a bullish inflection point for sterling assets," he says.

Still, the reaction in markets was pretty subdued, perhaps because the announcements were mainly promises that are to be implemented after the next general election, due to take place before the summer of 2029.

Burnham would have to win that first, and current polling would suggest that is, by no means, a foregone conclusion.

But Kaletsky believes a politician who is serious about initiating a debate on the controversial issues that will determine Britain's future should be viewed positively by markets.

"Politicians must acknowledge that difficult choices exist," says Kaletsky.

"Burnham has started to do this—and investors are likely to prefer a government that confronts controversial issues instead of just declaring them taboo."

But before that, is the first budget of Burnham's finance minister, John Healey, in late October. Healey , like previous finance ministers, has a fine line to tread — delivering a recipe for growth that does not upset the bond markets.

(Samuel Indyk)

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