London close: Stocks mixed as Chancellor unveils tax hikes

30th Oct 2024 14:57

(Sharecast News) - London stocks saw mixed results on Wednesday as investors weighed the impact of the £40bn worth of tax rises announced by Rachel Reeves in her first Budget as Chancellor.

The FTSE 100 index fell 0.73% to close at 8,159.63 points, while the FTSE 250 edged up 0.35% to end the session at 20,694.12 points.

In currency markets, sterling was last down 0.08% on the dollar to trade at $1.3004, as it slipped 0.49% against the euro, changing hands at €1.1971.

"Labour's first Autumn Budget in 14 years provoked a near 4% rally in the UK AIM All-Share Index [and] pushed UK 10-year gilt yields towards 4.4%, but had little impact on the FTSE 100 and sterling," said IG senior analyst Axel Rudolph.

"The FTSE 100 ended the day in negative territory while the FTSE 250 remained marginally positive as the FTSE AIM All Share Index stole the show and rallied by close to 4%, following the Budget's beneficial tax changes for its investors.

"European indices also suffered as the German inflation rate accelerated to 2% and US third-quarter GDP growth came in below forecasts."

Rudolph noted that data showing that euro area GDP growth doubled in the third quarter, and US private companies added the most jobs in over a year, did not stem the sell-off.

"Much lower-than-expected crude oil inventories provoked an over 2% rally in the oil price while the price of gold hit a new record high.

"The silver price dropped by nearly 2%, though."

Reeves announces £40bn in tax rises in her first Budget

At the top of the agenda on Wednesday was Rachel Reeves's first Budget as Chancellor, where she unveiled £40bn in tax increases, directly confronting the previous government's fiscal policies.

She accused the former Conservative administration of leaving a £22bn deficit in public finances, calling their actions "the height of irresponsibility".

According to Reeves, the Office for Budget Responsibility (OBR) confirmed that it lacked complete information in prior forecasts, stating that the projections would have changed "materially" with full data.

To enhance transparency, Reeves committed to a "line-by-line" disclosure of the deficit, which she said stemmed from numerous unfunded pledges.

Opposition leader Rishi Sunak countered the accusations, stating the OBR's independence should be protected from political influence.

Reeves outlined targeted tax measures, including increases in National Insurance (NI) contributions for employers and a planned inflation-linked rise in income tax and NI thresholds by 2028-2029.

Key measures included a hike in the lower and higher rates of capital gains tax to 18% and 24%, respectively, while abolishing the non-domicile tax regime from 2025.

Additionally, private school fees would incur VAT, and business rates relief for private schools would end in 2025.

Meanwhile, stamp duty on second homes was set to rise to 5%.

On the spending front, Reeves pledged substantial investments in HS2, housebuilding, and the NHS, with a £26.1bn increase in day-to-day health service funding over ten years.

The OBR's latest forecasts predicted consumer inflation would moderate, reaching 2.5% in 2024 and easing to 2.0% by 2029.

GDP growth was meanwhile expected to rise to 2% next year, stabilising to around 1.6% by the end of the decade.

"It was a big spend, big tax, big borrow Budget, with an overhaul of the government's fiscal rules," said analysts at TD Macro.

"But crucially, it contained few material surprises.

"OBR forecasts showed stronger near-term growth and inflation, but the growth impulse is entirely driven by public sector spending, with private sector growth weaker."

Across the Atlantic, the US economy showed resilience in the third quarter, with GDP expanding at a 2.8% annual rate, supported by a strong 3.7% increase in consumer spending and a robust 11.1% rise in non-residential investment.

On the continent, eurozone growth accelerated beyond expectations to 0.4%, driven by steady economic performance across member states.

Germany, despite recent economic struggles, posted unexpected growth of 0.2% in the third quarter, helped by consumer and government spending, narrowly sidestepping a technical recession.

Standard Chartered in the green, GSK falls on third-quarter sales miss

On London's equity markets, Standard Chartered rose 4.13% after it raised its full-year outlook on the back of record third-quarter profits from its wealth division, which exceeded analyst expectations.

Glencore also advanced, up 1.56%, following its third-quarter production update.

Retailer Next climbed 1.14% as colder weather spurred sales, prompting the company to raise guidance for both the fourth quarter and full year, a positive boost also felt by shares of Marks & Spencer.

Aston Martin Lagonda surged 5.12% after the luxury carmaker backed its full-year forecast and posted a smaller-than-anticipated third-quarter loss.

Meanwhile, Grafton Group rose 4.37% on news of its acquisition of Spanish HVAC distributor Salvador Escoda, which promises expanded operations across Spain.

On the downside, GSK dropped 3.07% after reporting third-quarter sales that missed market expectations, sparking investor disappointment.

Defence firm BAE Systems slipped 0.82% following reports of a fire at its Cumbria nuclear submarine facility.

IG Group fell 0.56%, reversing earlier gains after announcing Clifford Abrahams, Virgin Money UK's current CFO, as its incoming finance chief.

Hochschild Mining shares declined by 2.53% as investors reacted cautiously to its $60m acquisition of Brazil's Monte Do Carmo Project, a move anticipated to expand its mining portfolio but with significant financial outlay.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 8,159.63 -0.73%

FTSE 250 (MCX) 20,694.12 0.35%

techMARK (TASX) 4,696.11 -0.19%

FTSE 100 - Risers

Smurfit Westrock (DI) (SWR) 3,779.00p 9.70%

Entain (ENT) 774.80p 8.64%

Flutter Entertainment (DI) (FLTR) 18,140.00p 5.62%

Standard Chartered (STAN) 912.60p 4.13%

Croda International (CRDA) 3,734.00p 3.12%

Imperial Brands (IMB) 2,304.00p 2.72%

CRH (CDI) (CRH) 7,390.00p 2.44%

Smith (DS) (SMDS) 477.40p 2.23%

Pearson (PSON) 1,140.00p 1.97%

B&M European Value Retail S.A. (DI) (BME) 401.30p 1.42%

FTSE 100 - Fallers

Anglo American (AAL) 2,385.50p -3.93%

GSK (GSK) 1,407.00p -3.07%

AstraZeneca (AZN) 11,206.00p -2.84%

Diageo (DGE) 2,450.00p -2.64%

Spirax Group (SPX) 6,535.00p -2.54%

Fresnillo (FRES) 759.50p -2.44%

Antofagasta (ANTO) 1,776.00p -2.15%

Sage Group (SGE) 988.60p -1.97%

Experian (EXPN) 3,781.00p -1.92%

Convatec Group (CTEC) 218.00p -1.89%

FTSE 250 - Risers

Aston Martin Lagonda Global Holdings (AML) 110.60p 5.12%

Grafton Group Ut (CDI) (GFTU) 1,043.20p 4.37%

Alpha Group International (ALPH) 2,150.00p 4.37%

Trustpilot Group (TRST) 252.50p 4.12%

Harbour Energy (HBR) 273.90p 3.79%

Ibstock (IBST) 208.50p 3.73%

4Imprint Group (FOUR) 5,400.00p 3.45%

Bank of Georgia Group (BGEO) 4,085.00p 3.42%

SThree (STEM) 373.50p 3.17%

Energean (ENOG) 1,011.00p 2.95%

FTSE 250 - Fallers

Close Brothers Group (CBG) 232.00p -5.07%

W.A.G Payment Solutions (WPS) 77.60p -4.43%

Watches of Switzerland Group (WOSG) 431.60p -3.49%

Workspace Group (WKP) 592.00p -3.27%

Hochschild Mining (HOC) 231.00p -2.53%

Dr. Martens (DOCS) 55.20p -2.39%

Sirius Real Estate Ltd. (SRE) 91.00p -2.36%

Computacenter (CCC) 2,272.00p -2.15%

Fidelity China Special Situations (FCSS) 213.50p -2.06%

Wizz Air Holdings (WIZZ) 1,366.00p -1.80%