FTSE 100 stocks seesawed their way to a flat close on Wednesday as investors weighed up the first UK budgetary statement since Britain voted to leave the European Union in June.
At the centre of investors’ trepidation over what budget author Chancellor of the Exchequer Philip Hammond called preparation for making Britain “match fit” post-Brexit, was news that the government is planning for an additional £122bn of debt during this parliament which expires in 2020. The debt, on the other hand, may well become a heavy legacy for Hammond’s successor.
Hammond also announced that economic growth is forecast to slow and made an administrative change. In future the Autumn Statement will be replace by the main Budget which has traditionally taken place in March.
The blue-chip FTSE 100 ended at 6817 – barely changed on the day. Such was the disorientation of the day that even sectors dominated both the risers, and fallers. The top gainer was miner Anglo American (LON:AAL) up 2.4% to 1237.5p and third-biggest gainer was miner BHP Billiton (LON:BLT) up 2.2% to 1363p.
But the biggest faller among FTSE 100 stocks was also a miner, Fresnillo (LON:FRES) down 3% to 1244p. while second-biggest faller was another resources firm Polymetal (LON:POLY) down 2.8% to 741p and fourth-biggest loser was Randgold Resources (LON:RRS) down 2.2% to 5685p.
In the mid-cap FTSE 250, which fell 0.3% to 17,622, news from Hammond of a ban on letting agents' fees hit property stocks hard. Estate agency Countrywide (LON:CWD) was the biggest decliner among mid-caps, off 5.2% to 193.9p, while Berekely Group (LON:BKG) was third biggest faller, of 3.8% to 2448p.
In the FTSE Small Cap index, which rose 0.04% to 4917, the top loser was estate agent Foxtons (LON:FOXT) down 14.3% to 105.25p
The FTSE AIM 100 Index ended own 0.2% at 3907 and the FTSE AIM All-Share Index down 0.1% to 815.
Across the London bourse only 28% of stocks gained while 35% fell.
Late session
FTSE broadly flat at 6,816
It had been down by more than 20 points at one point after the Autumn Statement
Chancellor's Autumn Statement sees UK government borrowing targets hiked
Bid stocks add spice to small caps sector
4pm...
The FTSE 100 rallied as it headed towards the close, leaving it broadly flat at 4pm.
It had started the morning on the front foot before its fortunes reversed following the Autumn Statement, in which the Chancellor hiked UK borrowing targets and implied that Brexit would cost the UK economy more than £220bn over the next five years.
The story was more of one-way traffic for gold as the precious metal plunged after the durable goods report showed that US business spending continued to rebound last month.
Spot gold fell beloww US$1,200 per ounce for the first time since February amid speculation that a Fed rate rise is now firmly on the cards, which 'safe-haven' bullion is particularly sensitive.
The oil price also fell on Wednesday with investors unconvinced that OPEC would agree to curb production enough toreduce the current global surplus when it meets next week.
The price for a barrel of Brent Crude fell to US$48.99.
3.05pm...
Lots of attention now on the £220bn Brexit hit revealed in the Autumn statement. UK National Debt will rise to just short of £2trn by the end of this Parliament as a result. That is double the amount of borrowing when the Tories came to power.
2.50pm...
Reaction from the Confederation of British Industry to the Chancellor’s statement earlier:
“The Chancellor has prioritised a pragmatic down payment on future productivity growth. His emphasis on R&D, housing and local infrastructure will help businesses in all corners of the UK to invest with greater confidence for the long-term, during turbulent times. This will be warmly welcomed,” said Director-General Carolyn Fairbairn.
“These measures must now be translated into action. That means tarmac, tracks and telecoms being laid, and clear, deliverable timetables for major projects – only then will they act as a catalyst for investment, jobs and growth.”
1.50pm...
The initial reaction from the markets was more a shrug of the shoulders than anything else, although the FTSE 100 slipped into the red after posting a small gain in the morning session.
The blue chip index fell 19 points during the speech, with investors seemingly pleased with big spending on infrastructure, but concerned that the new national living wage will affect retailers.
The £23bn infrastructure spending didn't do much for the likes of Balfour Beatty plc (LON:BBY) or Capita PLC (LON:CPI), which both traded sideways.
Housebuilders were unmoved by the news about new homes, which some had though might give them a little boost.
Even insurers were generally flat despite government plans to crack down on whiplash "claim culture" which should, in theory, benefit them.
The well-flagged ban in letting agent fees hit estate agents before the statement was even read, and nothing changed as Hammond ploughed on through.
Airlines - another tipped to benefit from the Autumn Statement - were unchanged after the government didn't announce any immediate plans to lower air passenger duty.
1.30pm...
PH continues to sweeten up the JAMs, announces tax-free personal allowance will rise to £12,500 by end of parliament, while the national living wage will increase to £7.50 from April.
As expected, Universal Credit 'taper rate' reduced to 63% from 65% - a tax cut worth £700mln by 2021/22, the Chancellor says.
Hammond also addresses energy companies and warns them that ministers will have to "look carefully" at intervening in the market.
Again, as expected, Hammond bans letting agents charging fees to tenants. "Landlords appoint letting agents and landlords should pay their fees."
Another one widely reported earlier on, the government is freezing fuel duty for the seventh consecutive year. Average driver should save around £130 a year.
The big news though, is that PH is abolishing the Autumn Statement from next year. Instead UK will have an Autumn Budget which announces tax changes, while from 2018 there will be a Spring Statement, with no major changes.
"I will not make signifcant changes twice a year just for the sake of it," he says, and calls it a "long overdue reform".
Hammond is done. Nothing on NHS or social care at all in the speech.
1.20pm...
Good news for the oilers - PH confirms that its previous support for the oil and gas industry will remain.
Also brings up the whiplash crackdown which was widely reported. He reckons it will save the average motorist £40 each year.
Insurance premium tax will rise from 10% to 12% from next June.
He also calls workplace benefits that are difficult to tax "unfair" and vows to crack down on this too.
Bye-bye to to most salary sacrifice schemes...only raises c. £100m & likely to be unpopular with voters. #AutumnStatement
— Dharshini David (@DharshiniDavid) November 23, 2016
PH confirms that corporation tax will fall to 17% as planned, which he says will be the lowest overall rate in the G20.
Government to crack down even more on tax avoidance, which could raise £2bn a year according to the Chancellor.
1.10pm...
Chancellor confirms that givernment will invest £1bn in digital infrastructure.
OBR forecasts of UK economic growth:
- 2.1% in 2016 - up from 2% forecast before Brexit
- 1.4% in 2017 - down from 2.2%
- 1.7% in 2018 - down from 2.1%
- 2.1% in 2019 - unchanged
"I have deliberately avoided making this statement a long list of indivdual projects, but..." - Chancellor says Wentworth Woodhouse in Rotherham will get £7.6mln to save it.
Hammond confirms he wrote this speech. Was there ever any doubt?
— Philip Webster (@Pwebstertimes) November 23, 2016
There's some good news for Sadiq Khan as well. London will receive £3.15bn as its share of the national affordable housing funding to deliver more than 90,000 new homes in the capital.
1pm...
Chancellor announces a new National Productivity Investment Fund of £23bn to be spent on innovation and infrastructure over the next five years.
He explains: “[We’re] investing today for the economy of the future.”
Chancellor also repeats what we already knw, that the government will renew its investment in affordable housing including a £1.4bn cash injection to help build 40,000 new homes.
PH: "A step-change in our ambition to increase the supply of homes for sale and for rent."
12.50pm..
Hammond explains the forecasts for the next five years and reiterates that the government "no longer seeks to deliver a surplus in 2019-20".
Instead, he says public finances will return to balance as soon as "practicable" in the next parliament.
In 2018-19, debt is projected to fall to 89.7% of national income which would be the first fall in the national debt as a share of GDP since 2001-02.
OBR estimates that economic growth will be 2.1% this year, falling to 1.7% next year, which PH concedes is "slower than we would wish" and cites the uncertainty of Brexit as one of the reasons.
12.40pm...
The Chancellor takes to the stand, a little later than anticipated.
He starts by saying that the British economy has "confounded commentators athome and abroad" since the Brexit vote, and wants to "build an eocnomy that works for everyone".
He also thanked his predecessor George Osborne, explaining: "My style will of course be different than his...[but] my focus on building Britain's economy will no doubt be the same."
12.30pm...Here's what we know about so far
- Ban on letting agency fees
- National Living Wage to rise 4% to £7.50 for over-25s
- Universal Credit 'taper rate' slowed
- £1.4bn set aside to creat 40,000 new homes
12.10pm…Autumn Statement coverage so far
To keep you interested while we wait for the Chancellor to take to the despatch box, brush up on a couple of the Autumn Statement stories published by Proactive earlier this morning
READ: Estate agents slump on letting fees worries
WATCH: 'Possible stamp duty cut' to regenerate housing market
READ: Autumn Statement preview
12.05pm…What does RBC expect to hear from Philip Hammond?
Here’s a list of what analysts at RBC expect Philip Hammond to cover in his speech shortly:
• Incremental £1.3bn investment in the road network
• Science and R&D spend increase of £2bn
• A variety of measures to help “Just About Managing” families – softening cuts to welfare benefits and a fuel duty freeze, for example
• Digital infrastructure spend of >£1bn for fibre broadband/5G
• Possible hint to future VAT cut
• Increased pricing regulation on phone/utility costs
• Cut to Air Passenger Duty
• Further help for UK Housing and possibly a change to the second home stamp duty regime
• Hints of further UK corporation tax cut to 15% following Theresa May’s CBI presentation (cut to 17% from 2020/21 already announced)
10am...Markets calm as Autumn Statement approaches
Having secured its position above 6,800, the top-share index could now be setting its sights on 6,900.
Fuelled by strength last night on US markets, the FTSE 100 was up 45 points at 6,864 as the clock approached 10.00am, with mining stocks doing much of the heavy lifting.
The Chancellor of the Exchequer, Philip Hammond, is set to start his Autumn Statement at 12.30pm so some of the initial exuberance in the market is dying down as investors wait to see what the government’s new abacus-rattler has in his box of tricks.
Nestling among the mining stocks at the top-end of the Footsie leader-board was United Utilities Group PLC (LON:UU.), which rose 2.9% to 921p on the back of a half-year report in which it revealed operating profit was slightly ahead of last year.
The all-important dividend has been raised 1.1% to 12.95p.
Having taken a bit of a bashing yesterday following its results, contract caterer Compass Group PLC (LON:CPG) headed north today, helped by Barclays Capital nudging up its price target by 50p to 1,550p.
In the small cap space, buyers appear to be queuing up to buy workforce management software specialist ServicePower Technologies Plc (LON:SVR).
A couple of weeks ago the Aim-listed firm revealed it had received a bid approach from Canadian software powerhouse Constellation Software, but the shares collapsed late last night as Constellation informed the market about 15 minutes before the close of trading that it would not be making a bid.
About a minute before the market closed, ServicePower revealed it had rebuffed Constellation and is now talking to a Los Angeles-based private equity firm, Diversis Capital, about a 6p-a-share offer.
Not surprisingly, the shares shot up this morning, but at 4.5p are still some way short of the indicative price being talked about by Diversis, despite a 71% increase.
Also going well was another bid stock, Brammer PLC (LON:BRAM), which shot up 69% to 164.75p as the board gave its support to a 165p-a-share cash offer from a new company backed by funds managed by Advent International.
8.42 ... Hammond organised
The FTSE 100 opened in a chipper fettle following a record-breaking session on Wall Street overnight and ahead of Chancellor Philip Hammond’s first Autumn Statement.
The index of blue-chip shares rose 41 points in the first half hour of trading to settle at 6,860.92. This after the Dow Jones smashed through 19,000 for the first time ever.
As for the Chancellor, he is expected to downgrade the UK’s GDP forecast, while the budget deficit is likely to be higher than first thought.
“These headline revisions suggests Hammond doesn’t have a lot of room to produce anything particularly pleasant,” said Connor Campbell, analyst at Spreadex.
After the sharp rise in mainstream mining stocks Tuesday, precious metals miners Fresnillo (LON:FRES) and Randgold Resources (LON:RRS) were in the shop window.
In the mid-cap index, CMC Markets (LON:CMCX) was among the day’s biggest losers after issuing a rather cautious outlook statement alongside its first half results.
Financial markets remain subdued and companies such as CMC, which specialises in spread betting and contracts for difference, thrive on volatility.
6.45am.... decent start predicted
London’s blue chips are set to start strongly following the landmark of the Dow Jones Industrial Average passing through 19,000 for the first time.
Financial spread bet firms see FTSE 100 adding almost 40 points when the market opens, to follow similar gains on Tuesday when the index finished the day up 41 at 6,819.
Headlines in the UK will be dominated by Philip Hammond’s Autumn Statement, his first as Chancellor.
This will be about Brexit, how it impacts the big numbers for the UK economy and how Hammond intends to balance the books.
Suggestions already flagged included letting agents fees being banned, a clampdown on whiplash fees and changes to the universal credit.
Overnight the Dow comfortably held on to its early gains and finished at another record of 19,023. There were also gains for Nasdaq and the S&P 500.
Asian markets were mixed with Tokyo higher but small losses for Hong Kong and Shanghai.
Currencies/Commodities
- Oil (WTI): down 0.12 to US$47.01
- Gold : up US$3 to US$1,212
- US$/£:1.24, US currency up sightly
In the papers
- Crude nears $50 as hopes of OPEC deal grow- The Times
- VW plots driverless road ahead – The Times
- Millions of Trump voters to lose overtime pay once he takes office – The Independent
- Government ‘acting like Dad’s Army’ over Brexit says Ryanair boss – The Independent
- Hewden collapses into administration after warning about Brexit slowdown – The Daily Telegraph
- All Bar One owner sees trouble ahead as pub costs rise – The Daily Telegraph
- Cobham chairman quits in latest departure from the troubled engineer – The Daily Telegraph
- Autumn statement: Hammond to crack down on letting fees – The Guardian
- Hackers wipe £5 billion off engineer Vinci in 25 minutes with hoax press release saying it had fired its finance director – Daily Mail
- The European Commission unveils US-style protection for insolvent companies – City AM
- Deutsche Boerse expects EU statement of objections to London Stock Exchange merger before Christmas – City AM