𝓤𝓷𝓲𝓽𝓮𝓭 𝓝𝓮𝔀𝓼

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Stocks in London ended mixed on Wednesday as investors assessed Chancellor John Healey’s first Budget and looked ahead to an expected US interest rate hold.

In London, the FTSE 100 index ended up 7.96 points, or 0.1%, at 10,694.50. The FTSE 250 ended 77.11 points lower, 0.3%, at 24,639.26, and the AIM all-share advanced 2.43 points, 0.3%, at 760.92.

In London, Mr Healey delivered his first Budget which he said was “for the working people of Britain”, and was built on “fiscal discipline”.

Mr Healey said the Labour government’s plans will give “breathing space” to households and bring “innovation and growth in every postcode”.

He announced increases to taxes on profits earned by banks and betting companies to help fund support for soaring energy bills.

“Fiscal discipline is my first commitment,” said Mr Healey, as he faced up to pressure to reassure bond markets.

Tom Stevenson, investment director at Fidelity International, said: “For investors, the message was one of stability, with few major surprises to unsettle financial markets.”

The challenging economic backdrop to the Budget was laid bare in forecasts from the Office for Budget Responsibility.

While growth this year was upgraded to 1.2% from 1.1%, the watchdog slashed its estimate for next year from 1.5% to 1%.

Inflation is forecast to reach 3.1% in 2026 and 3.4% in 2027, before returning to 2% in 2028, around a year later than forecast in March.

Fiscal headroom against the current Budget rule is seen at about £15 billion in 2029-30, down from £23.6 billion in the March 2026 forecast, before being rebuilt to £22 billion in 2030-31.

Peel Hunt chief economist Kallum Pickering called it a “mostly inconsequential” Budget, and one that markets can “tolerate”.

“For all Prime Minister Andy Burnham’s talk that the UK should not be in hock to the bond market, his government’s first Budget, delivered by Chancellor John Healey, was plainly designed with the market in mind.

“Fiscal rules were left untouched, higher debt-interest costs more than accounted for the reduction in near-term headroom, and there were no broad-based tax rises to spook anyone,” he noted.

Sanjay Raja, Deutsche Bank’s chief UK economist commented: “The Chancellor’s mantra heading into the autumn Budget was to ‘do no harm’, and we think the Chancellor successfully met this objective.”

ING said the Budget “keeps the deficit on a downward trajectory and, crucially, doesn’t do anything that could make life harder for the Bank of England. But many of the UK’s longer-term challenges remain unfunded and unaddressed, while the Budget keeps alive the option of an early election in 2027”.

Bond markets took the Budget in their stride with yields on UK 10-year gilts nudging down to 5.33% from 5.34% at the same time on Tuesday.

Kathleen Brooks, research director at XTB said the bond market’s verdict is a “decent B+”, adding “overall, this Budget is steady as she goes”.

On currency markets, sterling was little moved. The pound was quoted at 1.3310 dollars, up from 1.3307 dollars. Against the euro, sterling edged down to 1.1941 euros from 1.1943 euros.

On the FTSE 100, banks held firm despite the news that the UK’s lenders will pay an extra 3% banking surcharge, rising to 6%.

The Government said the higher levy will be temporary and be in place for 15 months. There had been fears that the levy would return to the previous 8% level it had stood at until 2023.

RBC Capital Markets analyst Benjamin Toms estimates the changes to the surcharge will be a net headwind for bank FY27 profitability of up to 4%.

“The market will be sceptical that these changes will be temporary based on experiences elsewhere in Europe such as Spain,” he added.

Lloyds Banking Group closed up 1.7%, Barclays up 1.6% and NatWest up 2.0%, while Asia-focused peer Standard Chartered rose 2.4% after raising guidance alongside third quarter earnings.

Entain rose 3.6%, and Rank jumped 12%, despite the extra gambling duty.

JPMorgan said the increase in machine gaming duty to 25% from 20% was “a relief versus worst-case fears” and well below earlier speculation that it could double to 40%.

But housebuilders went into reverse despite confirmation of a support scheme for first-time buyers in the Budget.

Barratt Redrow slumped 6.6%, Taylor Wimpey fell 7.3% and Persimmon 6.9% after all being firm features heading into the fiscal statement.

Analysts suggested there could be some potential disappointment on the total funding level, and timing, of the scheme, which is likely to lead to softer sales rates in the interim.

In European equity markets on Wednesday, the CAC 40 in Paris ended flat, while the DAX 40 in Frankfurt climbed 0.4%.

In New York, markets were mostly higher. The Dow Jones Industrial Average was up 0.3% at the time of the closing bell in London on Wednesday. The S&P 500 was 0.2% higher but the Nasdaq Composite eased 0.1%.

Against the dollar, the euro firmed to 1.1148 dollars on Wednesday from 1.1142 on dollars Tuesday. Against the yen, the dollar was trading at 158.23 yen, up from 157.88 yen.

The yield on the US 10-year Treasury was quoted at 5.03%, stretched from 5.00%. The yield on the US 30-year Treasury was quoted at 5.33%, widened from 5.31%.

Investor attention now switches to the Federal Reserve’s interest rate call.

David Morrison at Trade Nation commented: “As far as investors are concerned, the consensus expectation is that interest rates will be left unchanged, even though all major US inflation measures show that prices are far from stable, and are well above the Fed’s 2% target.

“Yet the CME’s FedWatch Tool suggests that the US central bank will tighten monetary policy before year-end and could raise rates further in the first quarter of 2027 as well.”

The European Central Bank holds its own monetary policy meeting tomorrow, while the Bank of Japan meets on Friday. Both are expected to keep interest rates unchanged.

Back in London, drugs maker GSK gave up 4.8%. While third quarter earnings and sales came in ahead of forecast, investors were unsettled by a below consensus contribution from its vaccines division.

On the FTSE 250, Hunting plunged 9.5% as it lowered full-year guidance for the second time in just over two months as it said the Middle East conflict has hurt trading in the second half of the year.

Chief executive Jim Johnson said: “Whilst the long-term fundamentals of our end-markets remain robust, which includes ongoing strong trading results within our Subsea-focused businesses, the protracted and deepening nature of the conflict in the Middle East has impacted our overall results in Q3 and into Q4, with a deterioration in the short-term trading outlook seen in recent weeks.”

As a result, Hunting cut its full-year 2026 adjusted earnings before interest, tax, depreciation and amortisation guidance to 128 million dollars to 133 million dollars from 138.0 million dollars to 141.0 million dollars previously. In August, Hunting reduced Ebitda guidance from 145.0 million dollars to 155.0 million dollars.

Brent was quoted at 116.37 dollars a barrel, up from 114.13 dollars at the same time on Tuesday.

Gold was quoted at 4,039.18 dollars an ounce, down from 4,057.67 dollars.

The biggest risers on the FTSE 100 were Whitbread, up 145.0p at 2,737.0p, SSE, up 114.0p at 2,604.0p, Centrica, up 5.75p at 156.20p, Standard Chartered, up 49.0p at 2,068.0p and Halma, up 70.0p at 3,446.0p.

The biggest fallers on the FTSE 100 were Barratt Redrow, down 22.2p at 315.7p, GSK, down 92.0p at 1,831.5p, Informa, down 26.2p at 827.2p, Kingfisher, down 9.5p at 349.6p and J Sainsbury, down 8.6p at 338.4p.

Thursday’s local corporate calendar has third quarter results from oil major Shell and lender Lloyds Banking Group, plus trading statements from miner Glencore, consumer products firm Haleon and engineer IMI.

Thursday’s global economic calendar has the eurozone interest rate decision, UK mortgage approvals numbers, US personal consumption expenditures figures and initial jobless claims data.

– Contributed by Alliance News