London midday: Stocks a little firmer ahead of Budget, Powell speech
By Michele Maatouk
Date: Wednesday 06 Mar 2024
(Sharecast News) - London stocks were still a little firmer by midday on Wednesday as investors eyed the Spring Budget and a speech by US Federal Reserve chair Jerome Powell.
The FTSE 100 was up 0.3% at 7,666.76.
Chancellor Jeremy Hunt will deliver his budget at 1230 GMT.
Neil Wilson, chief market analyst at Finalto, said: "Budget Day - what to expect from Wonky Wednesday? For policy wonks at the Treasury, it's their big day out. Pre-election personal tax giveaways have been well leaked - eg NI cut by 2p again. There could be a more eye-catching income tax cut. A cut to income tax would be a bit of a rabbit - whether enough to swerve election wipeout remains to be seen. The risk is that, somewhat against character, Hunt announces a bunch of tax cuts that upset the markets.
"We have seen before that bond vigilantes are hunting in their packs again. I don't think this is really going to happen and Hunt will lean again on fiscal drag to do the lifting, a particular bugbear when inflation and wage growth ought to have seen the levels change a lot since 2020.
"The tax rate will beat the post-war high of 37.2% of GDP in 26/27 or 28/29 depending on what Hunt does today - it will be breached no matter what, largely because of fiscal drag. We note that the IFS has warned the debt ratio will remain in the 90s whatever happens. In other words it's totally meaningless tinkering unless they get a grip on the bigger stuff. At least Truss and Kwarteng had a go, albeit more Ronald McDonald than Ronald Reagan; the rest are cowards.
"Either way taxes and debt will remain historically high, productivity and growth historically low; financing wars, financing an ageing population, financing immigration - it's all squeezing the middle until the pips squeak. This is not how to get Tory-leaning voters to come out for you. Debt debasement trades are flying with gold and bitcoin surging to record highs - of course that is more about the US than the UK, but the underlying message is that debt is starting to matter as countries run higher structural deficits."
Investors were also eyeing Powell's testimony in Congress at 1500 GMT for any clues on the timing, frequency and size of interest rate cuts.
On the macro front, a survey out earlier showed that the UK's hard-pressed construction sector strengthened last month, led by a turnaround in housebuilding.
The latest S&P Global UK construction purchasing managers' index came in at 49.7 in February, still in negative territory but a notable improvement on January's 48.8.
A reading below the neutral 50.0 mark indicates contraction, while one above it suggests growth.
It was also the highest since August and better than expected, with most analysts looking for 48.0.
Within that, house building saw the biggest turnaround, jumping to 49.8 - the highest since November 2022 - from 44.2 a month earlier.
Overall, business optimism was the most upbeat since January 2022. Respondents said they expected an upturn in customer demand over 2024, as economic and financial conditions strengthened.
New work, meanwhile, rose for the first time since July.
Tim Moore, economics director at S&P Global Market Intelligence, said: "The forward-looking survey indicators provide encouragement that business conditions could improve in the coming months.
"However, a protracted downturn in activity has made construction companies cautious about their employment numbers. Staffing levels dropped for the third time in the past four months, and the latest round of job shedding was the steepest since November 2020."
In equity markets, Convatec was the top gainer on the FTSE 100 as it lifted its forecasts for medium-term organic growth after a strong performance in 2023 which saw a rise in margins and double-digit profit growth.
BA and Iberia owner IAG flew higher after a double upgrade to 'overweight' at JPMorgan.
Premier Foods rallied as it said that it will benefit from £33m increased free cash flow in the financial year to 29 March 2025 after reaching an agreement with the trustee of its pension scheme to suspend pension deficit contribution payments from 1 April 2024.
Tui travelled higher after an upgrade to 'overweight' at Morgan Stanley.
Breedon rose as the construction materials group announced the acquisition of US-based BMC Enterprises for an enterprise value of $300m (£238.1m).
On the downside, Legal & General fell after it posted lower-than-expected operating profits last year amid tough market conditions. Operating profit came in at a flat £1.67bn against company-compiled forecasts of £1.75bn.
Lancashire Holdings and Ibstock were also lower after results.
Market Movers
FTSE 100 (UKX) 7,666.76 0.27%
FTSE 250 (MCX) 19,414.69 0.75%
techMARK (TASX) 4,489.97 0.29%
FTSE 100 - Risers
Convatec Group (CTEC) 266.80p 5.71%
International Consolidated Airlines Group SA (CDI) (IAG) 148.85p 4.93%
Centrica (CNA) 130.95p 2.50%
Persimmon (PSN) 1,414.50p 2.13%
Airtel Africa (AAF) 98.55p 2.12%
B&M European Value Retail S.A. (DI) (BME) 550.60p 2.08%
London Stock Exchange Group (LSEG) 9,228.00p 2.06%
Barclays (BARC) 172.68p 1.90%
Marks & Spencer Group (MKS) 243.50p 1.88%
Kingfisher (KGF) 228.00p 1.83%
FTSE 100 - Fallers
Fresnillo (FRES) 480.10p -2.75%
Antofagasta (ANTO) 1,741.50p -2.03%
Legal & General Group (LGEN) 241.50p -1.59%
Reckitt Benckiser Group (RKT) 5,040.00p -1.45%
Pearson (PSON) 1,011.50p -1.32%
GSK (GSK) 1,661.80p -1.28%
Coca-Cola HBC AG (CDI) (CCH) 2,454.00p -1.21%
Hikma Pharmaceuticals (HIK) 1,881.00p -0.92%
AstraZeneca (AZN) 10,028.00p -0.83%
Ashtead Group (AHT) 5,152.00p -0.77%
FTSE 250 - Risers
Premier Foods (PFD) 153.80p 10.81%
TUI AG Reg Shs (DI) (TUI) 554.00p 6.13%
Breedon Group (BREE) 402.50p 5.92%
Jupiter Fund Management (JUP) 90.45p 4.03%
Genus (GNS) 1,745.00p 3.50%
Drax Group (DRX) 503.80p 3.43%
LondonMetric Property (LMP) 191.90p 3.28%
Aston Martin Lagonda Global Holdings (AML) 159.10p 2.65%
Mitchells & Butlers (MAB) 242.20p 2.63%
easyJet (EZJ) 552.00p 2.60%
FTSE 250 - Fallers
Lancashire Holdings Limited (LRE) 638.00p -4.99%
Ibstock (IBST) 153.00p -4.20%
IWG (IWG) 176.20p -2.11%
Rotork (ROR) 322.40p -1.65%
Diversified Energy Company (DEC) 915.50p -1.35%
Softcat (SCT) 1,480.00p -1.20%
Quilter (QLT) 100.60p -0.98%
Spirent Communications (SPT) 175.60p -0.79%
Ninety One (N91) 164.80p -0.78%
PPHE Hotel Group Ltd (PPH) 1,275.00p -0.78%
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