FTSE 100 in the red again as Chancellor unveils plans

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  • FTSE100 closes 24 points down at 7,253
  • Chancellor sits down after an hour and ten minutes
  • Pub group celebrate rates relief and new duty regime

12:15pm: FTSE 100 drops after Budget, pub groups and housebuilders seen as winners


The FTSE 100 closed in negative territory Wednesday, finishing the day at a 0.33% loss to close at 7,253 points.


“Rishi Sunak has delivered a welcome boost to the leisure and hospitality sector, with a temporary cut in business rates coming alongside a reduction in alcohol taxes,” commented IG’s senior market analyst Joshua Mahoney. “However, the prospect of fiscal tightening does raise questions over the seemingly impending BoE rate hike. In the US, tech stocks have outperformed thanks to a raft of better-than-expected earnings figure.”


Earlier, FTSE 100 was drifting lower towards the close as commentators gave their assessments on the Budget.


“Today’s budget does not draw a line under COVID. We have challenging months ahead,” chancellor Rishi Sunak said.


“But today’s budget does begin the work of preparing for a new economy post-COVID.”


Budget 2021 LIVE: Chancellor Sunak rejigs air passenger duty, business rates and booze duties


William Stevens, Head of Financial Planning at Killik & Co, said: “The focus in the weeks leading up to today was on how Rishi Sunak would plug the gap following the impact of Covid-19.


While action has already been taken throughout 2021 with increases to National Insurance Contributions and Dividend tax of 1.25%, increases in corporation tax, and the State Pension triple lock suspension, speculation was that Rishi would seek to further increase taxation to continue to shore up government finances.


“However, this did not materialise and in fact, Rishi reconfirmed the pledge of falling household taxation by the end of this government. Instead, he emphasised improved economic outlook and a focus on ‘driving economic growth through investment’ as the way forward for the UK.


“This combined with a collection of small tax cuts, including alcohol duty, could lead to stronger consumer spending, with the aim of a faster economic recovery from the effects of the last 18 months.”


Pubs and leisure sector shares jump as Chancellor offers rates relief and cuts beer duty


On the economic front, Martin Beck, senior economic advisor to the EY ITEM Club, said: “As expected, the OBR delivered a substantial reduction in its forecast for government borrowing this year and beyond, aided by upgrades to GDP growth and a cut in its estimate of the pandemic’s long-run ‘scarring’ effect on the economy.”


Elsewhere, US markets opened lower as expected, which might have also had an impact on the FTSE 100 which is down 20 at 7,257.


14:25PM: FTSE 100 drops after Budget, pub groups cheer rate relief


Now that the Chancellor has sat down, the process of sifting through the details to find any potential winners and losers begins


It was a mixed bag for the airlines. Air Passenger Duty has been slashed on domestic flights, but a new tax rate will be levied on long-haul flights.


EasyJet PLC picked up 1.3% to 617.2p, while British Airways owner IAG added 0.7% to 161p.


Hospitality venue owners in theory should also be pleased. Rate relief will be offered to pubs, music venues, cinemas, restaurants and hotels to the tune of GBP1.78bn.


Big estate owners such as Mitchells & Butlers (LSE:MAB) celebrated with a rise of 3.4% to 255p and in JD Wetherspoon’s case by 4.8% to 1,034p.


Sunak also announced a major overhaul of alcohol duties and a slashing of taxes on draught beer and ciders.


Headlines, though, will likely focus on the Universal Credit taper, which will be cut from 63p to 55p.


Otherwise, the problem with leaks was evident – everyone knew what was coming, hence FTSE 100 down 12 at 7,265


13;40pm: FTSE 100 in the red again as Chancellor unveils plans


As Budget rallies go, this is proving pretty short-lived with FTSE 100 only peeking into positive territory before dipping down again to a drop of around ten points to 7,268.


Autumn Budget Live: Read all the latest here


US markets are unlikely to be much help. with markets expected to open slightly lower after major indices closed at new records on Tuesday supported by continuing strong earnings from the likes of General Electric (NYSE:GE) and UPS as the third-quarter reporting season progresses.


Futures for the Dow Jones Industrial Average futures declined 0.04% in Wednesday pre-market trading, while contracts for the broader S&P 500 index shed 0.09% and those for the tech-heavy Nasdaq 100 retreated 0.15%.


Nearly 30% of S&P 500 companies have reported earnings and more than 80% of them have beaten Wall Street expectations. And S&P 500 companies are expected to grow profits by more than 35% in the third quarter.


The Dow ended Tuesday trading 16 points higher at 35,757, while the S&P rose 8 points to 4,575 points and the Nasdaq added 9 points to close at 15,236.


“Ahead of some major post-close earnings reports from the tech sector, the S&P 500 eked out a further 0.2% gain yesterday to close at a new record high,” commented Daiwa Capital Markets analyst Emily Nicol.


“Post-close earnings reports from tech giants Microsoft, Alphabet and Twitter appear to have broadly accorded with investor expectations and so US equity futures are presently little changed and UST (US Treasury) yields only fractionally higher. However, sentiment has soured somewhat in Asian markets, with most of the key bourses in the red today,” she added.


13.10pm: Inflation in focus in the Budget


The FTSE 100 recovered some of its earlier losses as chancellor Rishi Sunak delivered his third Budget.


It’s going to be a bean counters dream by the looks of it, but the highlights so far are an upgrade to the UK economic growth to 6.5% this year from 4% previously.


Budget watchers also say that inflation has been mentioned more this time in probably all the last five speeches combined with Sunak saying the government is prepared to take action if necessary.


Footsie has also got a boost from a cheerier than expected third-quarter update from pharma giant Glaxo.


Earnings have been upgraded for the year and sales were up in all of the core businesses.


FTSE 100 flat at 7,277.


12:12pm: New York set for slow open


London and Europe’s equity indices are expected to be joined in the red by those in New York when US stocks begin trading in a couple of hours.


The major US indices closed at new record highs overnight, supported by continuing strong earnings from the likes of General Electric (NYSE:GE) and UPS as the third-quarter reporting season progresses.


Futures markets are pointing to a 0.2% decline for the tech-fueled Nasdaq, while the Dow Jones and S&P 500 are trading down 0.1%.


Nearly 30% of S&P 500 companies have reported earnings and around 83% of them have beaten Wall Street expectations. And S&P 500 companies are expected to grow profits by more than 35% in the third quarter.


Among the tech names that announced earnings overnight, pre-market trading points to Microsoft Corp rising almost 1.7% as it reported booming cloud sales, Google parent Alphabet dropping 0.4% despite posting further strong growth, and Twitter climbing 1.9% as its quarterly loss was expected.


Robinhood Markets Inc (NASDAQ:HOOD), the fee-free broker behind the big rise in retail investor interest over the past couple of years, is heading for a 9% tumble after revealing an unexpected drop in revenues from cryptocurrency trades.


“Ahead of some major post-close earnings reports from the tech sector, the S&P 500 eked out a further 0.2% gain yesterday to close at a new record high,” commented Daiwa Capital Markets analyst Emily Nicol.


“Post-close earnings reports from tech giants Microsoft, Alphabet and Twitter appear to have broadly accorded with investor expectations and so US equity futures are presently little changed and UST (US Treasury) yields only fractionally higher. However, sentiment has soured somewhat in Asian markets, with most of the key bourses in the red today,” she added.


Back in London, the FTSE has cut some of its losses and is now down eight points at almost 7,270.


11.11am: Aveva and BT join fallers


The Footsie has headed ever lower, sinking 29 points or 0.4%, with BT Group PLC (LSE:BT.A) among those at the bottom of the pile.


BT was reported overnight to be strengthening its defences against a prospective takeover bid from France’s Altice, the telecoms group controlled by billionaire Patrick Drahi.


The telecoms group has hired advisory firm Robey Warshaw, where former Chancellor George Osborne joined as a new partner this year, to work alongside Goldman Sachs (NYSE:GS).


Another faller is Aveva Group (LSE:AVV), the engineering software company, after it released a brief trading update that revealed underlying sales growth of 9% at the half-year stage, with profit margins responding strongly to the growth in revenues.


The FTSE 100’s overall performance has echoed that of its European counterparts, noted Walid Koudmani at XTB market analyst, adding that the UK index has encountered resistance around 7250 after rising over 1% in the last week.


“Investors await today’s key budget announcement from chancellor Rishi Sunak where he will be outlining the post-Covid economy budget which is aimed at assisting in the economic recovery after the pandemic. The impact of such an announcement could vary depending on the scale of the measures implemented but it will be essential to reassure investors and consumers about the ongoing rise in inflation, supply chain issues as well as how the government plans to deal with unemployment.”


For more on the Budget, follow our other live blog


9.34am: Miners create a drag


Blue chips in London and across Europe have taken a backwards step, with miners leading the retreat for what could be the first negative trading session of the week.


The Footsie is down 13 points at 7,263.


Glencore PLC (LSE:GLEN) and Anglo American PLC are both down more than 2%, while Rio Tinto PLC and Antofagasta PLC (LSE:ANTO) are less in the red.


Another notable faller is big tech-focused Scottish Mortgage Investment Trust PLC (LSE:SMT), despite more bullish earnings reports overnight from the likes of Microsoft, Alphabet and Twitter – though none of these appear in its holdings above 0.7%.


Over on the FTSE 250, a positive early start has fizzled out and the mid-cap index is now flat at 23,162.


8.33am: Flat start


The FTSE 100 made a flat start to proceedings as London’s price-setters opted to keep their powder dry ahead of the Budget.


Widely pre-announced, the fiscal set-piece is unlikely to contain few surprises. Even so, the market approach was one of caution.


That said, the briefing ahead of the Budget appeared to be preparing the market for a pleasant surprise as it emerged the Treasury expects the UK economy to grow by 7% this year, almost double the 4% predicted by the Office for Budget Responsibility.


Earnings season, meanwhile, continued in a positive vein – on both sides of the Atlantic.


“Investors are riding the wave of surging company earnings, as the reporting season continues to outpace expectations,” said Richard Hunter, head of markets at Interactive Investor.


“In the US, there were strong tech and related earnings from the likes of UPS (strong e-commerce demand), Alphabet (an upbeat outlook for Google advertising) and Microsoft (high demand for its cloud business, especially on the back of the emerging hybrid working model). Facebook shares dipped, however, as it claimed that Apple’s new privacy changes will affect its digital business.


“At the same time, there was a slightly defensive tone, as evidenced by some moves into utility and healthcare stocks, as investors continue to ponder the outcome from the current inflationary and labour market pressures.


“Even so, the buying pressure was widespread if slightly muted and the resultant rising tide was enough to lift both the Dow Jones and the S&P500 to record closing highs.”


As he noted, far this year In the year to date, markets have provided a strong return despite the various challenges of the immediate outlook, with the Dow Jones up by 16.8%, the S&P 500 by 21.8% and the Nasdaq by 18.2%.


“A similar picture is emerging in the UK, with generally stronger earnings washing through despite the well-publicised issues of supply chain blockages, labour tightening and rising costs,” Hunter added, with the Footsie up 10.6%.


6.50am: Subdued start predicted


FTSE 100 is forecast open quietly ahead of chancellor Rishi Sunak’s third Budget though the mood is still upbeat after yesterday’s new 20-month high.


Financial spread betters suggest the index will open around five points down from Tuesday’s close of 7,277 based on the position of their books around two hours before the open.


Lots of the details in the Budget have been leaked already,


We know for sure the National Living Wage is going up by 6.6%, that a top-up of GBP1.5bn is being allocated for urban transport and a new GBP1.4bn life sciences fund is being set up.


Those losing out will be the housebuilders with a 5% levy on top of their corporation bill predicted,


Businesses involved in the energy industry looking for support might also be disappointed.


What has yet to be leaked, however, is the health of the UK’s finances and how the chancellor will pay for all of today’s initiatives.


So far, coronavirus support has cost upwards of GBP320bn and what the Office of Budget Responsibility (OBR) projects for the economy, borrowings and general UK economic wellbeing will be the market’s main focus.


The pound will be a good bellwether of how the market judges the numbers.


Sterling has been rising recently on talk of an early interest rate rise and if the finances and projections pass muster, it should do well again.


On the company front, GlaxoSmithKline PLC (LSE:GSK) and industrial software group Aveva PLC issue trading updates while Harry Potter publisher Bloomsbury publishes half-year numbers.


Significant announcements scheduled for Wednesday 27 October:


Trading updates: Aveva Group (LSE:AVV) (LSE:AVV) PLC, GlaxoSmithKline PLC (LSE:GSK) (LSE:GSK)


Interims: Bloomsbury Publishing PLC (LSE:BMY)


AGMs: Cap-xx, Frontier Developments PLC (AIM:FDEV), Hargreaves Services Plc (AIM:HSP, OTC:HGRVF), Ideagen PLC (AIM:IDEA), Invinity Energy PLC (AIM:IES), JPMorgan Global Growth & Income, Mirada PLC (AIM:MIRA), Pantheon International PLC (LSE:PIN), Springfield Properties PLC (AIM:SPR)


Economic data: BRC shop price index (UK), Durable goods orders (US)


6.50am: Early Markets – Asia / Australia


Stocks in the Asia-Pacific region were lower on Wednesday as Australian core inflation sped to its fastest annual pace since 2015 in the September quarter.


Data from the Australian Bureau of Statistics showed core inflation rose 0.7% in the quarter, above forecasts of 0.5%.


The annual increase was 2.1%, well above the 1.8% expected and putting core inflation back in the RBA’s 2% to 3% target range for the first time in six years.


Australia’s S&P/ASX200 gained 0.07% to 7,448.70 points on Wednesday.


China’s Shanghai Composite dropped 1% while Hong Kong’s Hang Seng index slumped 1.55%


In Japan, the Nikkei 225 fell 0.19% and South Korea’s Kospi declined 0.80%.


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