5 things to start your day: Europe

Good morning. Investors fret over tax plans in the UK and France. Wall Street traders face a unique challenge as growth continues while inte

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Good morning. Investors fret over tax plans in the UK and France. Wall Street traders face a unique challenge as growth continues while interest rates fall. And China announces more moves to prop up its sagging economy. Here's what people are talking about.

London's not calling

In Mayfair's financial enclave and the sleek offices of advisers to the ultra-rich, the talk is getting louder: everyone knows someone who's thinking about their exit strategy — or already gone. Moves that were once confined to whispers have burst into the open since the Labour Party came into power with promises to clamp down even further on preferential tax treatment for well-heeled foreign residents, as well as private equity investments and private school fees. Some are simply cashing in UK investments, but others — from scions of mega-rich families to City of London bosses — have mapped out or already executed departure plans. While the impact and likelihood of such departures are up for debate, the hazard lights are flashing. Meanwhile, in France, investors are cautiously eyeing Prime Minister Michel Barnier's plan to open the door to taxing wealthy individuals and large companies in a bid to repair the nation's massive budget.

Pivot to positive

The UK's new Labour government won't return to the austerity cuts of its Conservative predecessors, Chancellor of the Exchequer Rachel Reeves will promise on Monday, as she pivots toward a more positive narrative after weeks of warning about the dire state of the public finances. With Labour on Monday hosting what it's billing as the biggest ever business day at its annual party conference, Reeves is set to dangle the prospect of higher rates of investment as the key to unlocking the growth needed to fund government priorities. Reeves is under pressure to paint a brighter picture of Britain's economic prospects having spent much of her 11-week tenure warning of the difficult measures she'll have to take to address a £22 billion ($29 billion) fiscal hole she's inherited. That's raised expectations of tax rises in her budget on Oct. 30, with levies on inheritance, capital gains and property expected to increase.

History doesn't repeat

Wall Street traders have a unique challenge in placing bets on the stock market now the Federal Reserve has started cutting interest rates: History is no longer a guide. The classic playbook for when rates are coming down is to buy stocks in sectors that are considered defensive, like consumer staples and health care. Another popular play is shares of industries that pay big dividends, like utilities. The reason is that the Fed typically lowers borrowing costs to fight off a weakening economy or boost one that's already in recession. During those periods, companies in growth industries like technology tend to suffer — but that isn't happening now. Rather, the economy is growing, equity indexes are hitting all-time highs, corporate earnings are expected to keep expanding, and the Fed just went big with a half-percentage-point rate cut. There's no playbook for this.

China easing

China announced plans for a rare briefing on the economy by three top financial regulators just as it cut one of its short-term policy rates, fueling speculation authorities are preparing to ramp up efforts to revive growth. Authorities announced that central bank governor Pan Gongsheng will hold a press conference Tuesday on financial support for economic development. Minutes later, the People's Bank of China lowered the 14-day reverse repurchase rate, catching up with reductions initiated in July. Taken together the moves bolster expectations for the PBOC to lower rates, after the Fed finally started cutting last week. The action comes as the US Commerce Department is reportedly planning to reveal proposed rules that would ban Chinese- and Russian-made hardware and software for connected vehicles and as Citigroup's expansion plan in China hits a roadblock with US regulators after the Fed imposed a penalty on the bank for its data management and risk controls.

Apollo launches bid

Apollo Global Management has offered to make a multibillion-dollar investment in Intel, according to people familiar with the matter, in a move that would be a vote of confidence in the chipmaker's turnaround strategy. The alternative asset manager has indicated in recent days it would be willing to make an equity-like investment of as much as $5 billion in Intel, said one of the people. Intel executives have been weighing Apollo's proposal, the people said. Nothing has been finalized, the size of the potential investment could change and discussions could fall through, resulting in no deal, the people added. The development comes as San Diego-based Qualcomm floats a friendly takeover of Intel, people with knowledge of the matter said on Saturday, raising the prospect of one of the biggest-ever M&A deals.

Coming up

Coming up today we have September PMIs in France, Germany, the euro zone, the UK and the US. Central bank speakers include the ECB's Cipollone and the Fed's Bostic, Goolsbee and Kashkari.

What we've been reading

This is what's caught our eye over the past 24 hours. Scholz escapes another defeat to the Far Right in German state vote Banking's ultimate dealmaker Orcel hits German resistance Starmer struggles to reclaim 'change' narrative after missteps Rio Tinto chairman warns mining deals won't solve supply crisis UK urges Western 'fortitude' as Ukraine awaits missile decision Stock market mania takes hold deep in hinterlands of India Harris shows momentum in two polls while swing states remain tight

And finally, here's what Mark is interested in this morning:

The British pound's advance against the yen can run further as investors adjust to Bank of England interest rates staying higher for longer while the Bank of Japan appears to be deferring its next hike by several months. The pound was already gaining traction as an outperformer in the G-10 currency space due to downward pressure on euro-pound after the European Central Bank lowered rates for a second time in this cycle. That momentum will be amplified as the BOJ has dampened the outlook for a rate increase in October, with January becoming a more likely candidate for the next move. Even if the BOE does cut the official rate again before the BOJ increases, traders will be cautious about turning aggressively bullish on the yen until Governor Kazuo Ueda clearly reverts to a hawkish tone. Meanwhile, leveraged accounts recently reduced net long sterling exposure, leaving room for traders to rebuild positions amid broad US dollar weakness. In contrast, yen positioning is close to neutral after bears were squeezed out of the market during the August turmoil. That will likely tilt pound-yen further to the upside should upcoming economic data support the outlook. The first test this week will be a reading of Tokyo inflation which is forecast to show core CPI falling to 2%, a level even lower than where it was at the end of last year. Then that would be a catalyst for fresh yen selling, especially against major peers such as the pound. Mark Cranfield is a macro strategist for Bloomberg's Markets Live team, based in Singapore.

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