- FTSE 100 closes down 83 points
- Bank of England slashes interest rates
- Chancellor unveils fiscal stimulus to tackle coronavirus
5pm: FTSE 100 finishes lower
FTSE 100 index finished in negative territory on Budget Day, joining global indices in plunging yet lower as the coronavirus crisis deepens.
Britain's premier share index had been higher before lunch, and after a BoE rate cut, before seeing gains ebb away as new Chancellor Rishi Sunak set out his first budget against a highly challenging backdrop. The World Health Organization (WHO) has now officially labelled the coronavirus as a pandemic.
Today's budget was designed to get the country through the virus and ease the economic pain. Sunak unveiled a £30bn stimulus package for this year alone to help combat the virus, including at least £5bn for the NHS and £7bn for businesses and employees, but the market appeared indifferent.
Coronavirus cases have now reached 456 in the UK. Worldwide there are 118,000 cases in 114 countries.
Footsie closed down over 83 points at 5,876. FTSE 250 shed over 207 points at 17,339.
Wall Street shares also plunged The Dow Jones tanked 1,171 points, or 4.73% and the S&P 500 lost 120 points.
"Most economic shocks usually have fairly predictable consequences; however this coronavirus has completely changed the economic landscape as well as the political mood around the politics of balancing the books," noted analyst Michael Hewson at CMC Markets.
Chris Beauchamp at IG added: "The Chancellor of the Exchequer might have been forgiven for hoping for a bigger reaction to his budget, but as an ex-hedge funder he will know that the actual market move rarely matches expectations."
The Sunak budget though, noted the analyst, marked "a sensible and welcome departure from the austerity of old, and it should mark only the first step on a road to more expansive fiscal policy".
"But markets have mostly shrugged their shoulders, failing to be enthused by the Conservatives’ new devotion to spending."
3.55pm: FTSE extends losses
The Wall Street freefall, with the main stock indices all down at least 3%, is creating ripples back here in the UK, with the FTSE 100 now down 72 points or 1.2% to 5,888.6.
But some London shares are noticeably higher since Chancellor Sunak's budget announcement.
BT Group PLC (LON.BT.A) is still led the blue chip pack, up almost 3% after a budget pledge to invest in £5bn in superfast broadband and £510mln in improving mobile networks, especially in rural areas.
On the FTSE 250, Balfour Beatty (LON:BBY) is up 19% on the back of the promises for a £27bn splurge between 2020 and 2025 on roads, as well as investment in railways and stations, with Hill & Smith Holdings PLC (LON:HILS), a maker of crash barriers and other road safety infrastructure, also revving up.
Among the small caps, there was a significant Budget boost for book publisher Bloomsbury Publishing (LON:BMY), which gained 6% on news that VAT on digital books and magazines would be abolished, potentially providing a boost to sales.
Housebuilders largely shrugged off the budget's promise of £12.2bn in grant funding for affordable homes across England and his revelation that the government will unveil “comprehensive reforms” of the planning system on Thursday.
2.40pm: FTSE drops further, gilts yield retreat
The Office for Budget Responsibility said the “largest sustained fiscal loosening” since the 1992 budget, showed a major change for government policy.
Relative to its pre-budget baseline forecast, the new policy decisions will add £125bn (4.6% of GDP) to public sector net debt by 2024-25.
So, from 1.8% of GDP in 2018/19 the budget deficit is forecast to rise to 2.1% this year, 2.4% in 2020/21 and 2.8% in 2021/22 – all in all increasing the deficit by 0.9% of GDP on average over the next five years – even before factoring-in the possible impact of coronavirus.
The substantial increase in borrowing, had it been announced by a Labour Chancellor, would probably have been met with “howls of protest from currency and gilt markets”, said Richard Carter, head of fixed interest research at Quilter Cheviot.
“However, with bond yields at rock bottom levels and safe haven assets seeing strong demand, now is probably a good time for the government to invest for the future.”
Calling the budget “the death knell for austerity”, analyst Neil Wilson at Markets.com noted that planned issuance of new debt by the UK government in 2020-21 is lower than expected so there was actually a drop in gilt yields after the Budget, despite the policy largesse.
“The FTSE 100 has been largely unmoved. There is a broader weighing down from the US selloff today, but the rest of Europe is up a touch by about 0.5%. Sterling hasn’t budget either with GBPUSD holding around the 1.2950 level.”
Meanwhile, UK health authorities revealed that coronavirus cases in the country have risen to 456 from yesterday's 373, an increase of 83.
The FTSE 100 has fallen 25 points so far today at 5,935, a drop of 0.4%, not helped by a 0.4% increase in sterling to $1.2958.
Across the pond, the Dow was down more than 900 points or 3.7% at 24,072.
1.55pm: US stocks plunge on open
Stocks on Wall Street plunged after the opening bell, seeing most of their gains from the previous day wiped out.
The Dow Jones index fell more than 800 point in early trading to 24,177, a decline of 3.4%.
It was also bad, but not quite so bad, for the broader S&P 500, which fell 3%, and the Nasdaq Composite, which dropped 2.6%.
Fresh data showed US consumer price inflation dropped to 2.3% in February from 2.5%, with the plunge in crude oil prices expected to drag headline CPI below 1.0% soon.
"With underlying price pressures remaining contained, there is nothing in the incoming inflation data to stop the Fed from lowering interest rates to near-zero in the coming months and keeping them there for an extended period," said Capital Economics.
Back in Britain, big caps stocks have not yet taken much solace from the new Chancellor’s budget announcements, with the Footsie still just below flat at 5,951, a fall of nine points.
Analysts and other experts are firing out their responses, though, which could make the picture clearer for investors.
As well as noting that the corporate tax rate, which was due to reduce to 17% on 1 April, stay at 19%, Chris Sanger, EY's head of tax policy, added: “Many may be disappointed that the Chancellor hasn’t let the rate cut go forward for at least one year, given the challenges that will be faced in 2020/21 by businesses, be that from covid-19, Brexit, oil price fluctuations or indeed share price fluctuations.”
1.20pm: FTSE dips into red
As UK finance minister Rishi Sunak splashes the cash in his Budget, including a £30bn fiscal stimulus to help the UK economy combat coronavirus, the FTSE 100 dropped slightly into the red at 5,942, down two points.
As part of the stimulus, the Chancellor announced measures including a £5bn emergency response fund to support the NHS and other public services, the abolition of business rates for smaller shops, cinemas, restaurants and music venues, a £3,000 cash grant for any firm that is eligible for the small business rates relief, a loan scheme of up to £1.2m to cover the cost of salaries and bills to support SMEs, and funding statutory sick pay for two weeks for companies with fewer than 250 employees.
He said the Covid-19 outbreak "will have a significant impact in the UK economy but it will be temporary,".
Other budget changes included £27bn in roads, new investment in climate change policies, increases in R&D investment, the business rate discount to pubs raised to £5,000, keeping the corporate tax rate unchanged, personal finance changes such as increasing National Insurance threshold raises to £9,500.
Among market movers, BT showed why it was up earlier, as the Chancellor announced £5bn to get fast broadband into the regions.
12:25pm: US stocks expected to fall
The morning bullishness in UK and European markets has ebbed away and Wall Street is being called lower ahead of the opening bell in New York.
Futures markets were pointing to at least a 600-point fall for the Dow Jones industrial average, which would represent a loss of around 2.5% after the near-5% gain yesterday.
The S&P and Nasdaq are seen falling by similar percentages.
Back in the City, the Footsie is little moved at 5,971, 0.2% higher than the last close, before the Chancellor stands up in the Commons.
11.50: FTSE almost flat
Just before midday the FTSE 100 had lost almost all its gains from earlier in the morning as ongoing worries about the spread of coronavirus re-gripped the market.
Cabinet Office minister Michael Gove said that the next round of Brexit talks with the EU, which were scheduled for next week, might have to be cancelled because of coronavirus.
This came after news that an eighth British person has died from the virus and that UK health minister Nadine Dorries, who attended a cabinet meeting in the past week, has been diagnosed with Covid-19.
London’s stocks have mostly lost their initial chutzpah, with the blue chip benchmark up just 10 points at 5,970 – though the FTSE 250 is up 133 points or 0.8% at 17,680.47.
11.05am: Stocks in holding pattern ahead of Budget
The Footsie is back above 6,000 as the market reacts to the weak economic data released earlier, with some economists now cutting their forecasts for UK growth for the first quarter.
The ONS reports showed activity among services business has not rebounded as business surveys had implied after a weak finish last year.
“January’s GDP data are weak enough to suggest that the MPC probably would have cut interest rates anyway later this month, had the coronavirus never spread to Britain,” said Samuel Tombs at Pantheon Macroeconomics.
Admittedly, he said the 0.1% drop in industrial production was partly due to a 4.2% collapse in output in the energy supply sector due to unusually warm weather, while manufacturing output rose 0.2% and the 0.8% monthly decline in construction output was likely to partly reflect the disruptive influence of high levels of rainfall.
“In response to signs of continued underlying weakness, we are revising down our forecast for quarter-on-quarter growth in Q1 to just 0.1%, from 0.3%,” Tombs said, predicting a 0.3% quarter-on-quarter drop in GDP in the second quarter to be followed by a rebound in the third.
Ayush Ansal, chief investment officer at Crimson Black Capital, said: “Given the growing panic around the coronavirus and Wednesday’s emergency rate cut, few will be dwelling on the fact GDP was flat in January and the three months leading up to it.
He said the performance of the economy in January was not as “irrelevant” as some might think given the coronavirus-fuelled events of the past weeks.
“This weak GDP data suggests the UK economy is going into a period of potentially radical uncertainty with zero momentum.”
UK GDP flatlined in January, showing no signs of the rebound in activity signalled by all the business surveys. MPC probably would have cut Bank Rate this month anyway, had the virus never spread to Britain. pic.twitter.com/9lz85X8CAV— Samuel Tombs (@samueltombs) March 11, 2020
The FTSE 100 is up 44 points or 0.7% at 6,004, while the pound has flattened off to $1.2919.
10am: Disappointing UK data
London’s blue chips have lost more ground as a weak set of official economic growth and industrial data emerged.
Ahead of the budget later, the Office for National Statistics revealed UK gross domestic product was flat on the previous month in January, while economists had expected growth to just slow to 0.2% from 0.3%.
Industrial production was down 0.1% on the month and 2.9% year-on-year, both worse than expected.
Very disappointing news on #UK #economy even before #coronavirus started to have dampening impact as #GDP was unexpectedly only flat month-on-month in January. Had been hopes that activity would get a significant lift from improved #business & #consumer confidence after election— Howard Archer (@HowardArcherUK) March 11, 2020
The Footsie is now up 37 points, giving up the 6,000 milestone to slip to 5,997.
9.25am: FTSE gains chipped away by pound
The FTSE 100's initial gains have been chipped away by a rise in the pound after the BoE's early move, with the blue chip index now up 67 points at 6,028.
Sterling, having first dropped sharply on the central bank's announcement, has rebounded and is now up 0.4% against the dollar at 1.2961.
The co-ordinated action between Threadneedle Street and Downing Street was designed to send out a strong message, said market analyst Craig Erlam at Oanda, but whether or not it will have much of an effect is remains to be seen.
Coming two weeks before the BoE's next regular meeting, the move caught traders a little off-guard, he said, "but at the same time confirmed what they had already been expected at some point this month which is why the pound now finds itself back where it was just before.
"This is the problem with central banks all being near their lower bound, the potential for shock and awe just doesn't really exist."
However, looking at the detail announced alongside the interest rate cut, the Bank's monetary policy committee voted unanimously to introduce a new 'term funding scheme' with additional incentives for SMEs (TFSME) to offer four-year funding to banks at, or very close to, the base rate over the next 12 months, which the MPC expects the scheme to provide in excess of £100bn in term funding.
High street banks' countercyclical capital buffer has been cut to zero from 1%, which is expected to be maintained for at least 12 months, while the banks have been told not to increase dividends or other distributions, such as bonuses, in response to these policy actions.
Analysts at UBS noted that government bond markets had only slightly been caught out, with a headlong fall in yields over recent days and weeks, "together with the fact the Committee opted not to restart QE purchases at this time", meaning the Gilt market was "effectively well priced for the new policy measures".
They said markets had already been pricing for a high probability of ultra low policy rates in the coming months.
8.30am: Thunder stolen
It’s Budget Day and yet already someone has stolen head boy, er sorry, Chancellor of the Exchequer Rishi Sunak’s thunder.
Cue the Bank of England’s outgoing (and departing) governor, Mark Carney, 1950s smoldering matinee idol looks and all, with an emergency 0.50% cut to the base rate, which is now only 0.25%.
In reaction, the index of UK blue-chips jumped 108 points at open to 6,079.03 as the pound inevitably dropped.
The BoE intervention came with £290bn of extra funding, and according to Neil Wilson, senior analyst at Markets.com, the Bank has used its “big bazooka”.
“Unlike the Fed, which shot its bolt early, this is clearly part of a major coordinated response to the coronavirus pandemic with a twin pronged monetary and fiscal package,” he added.
“It’s a smart decision to move ahead of the scheduled meeting and do this on Budget day as it maximises the impact of the cut by tying it to the fiscal package.
“In the US the Fed has cut but we’re still waiting on the White House and a Congress to do their bit. Britain is in the best position to respond to the economic impact of the coronavirus. Heathrow has just said its numbers are down 4.8% - the damage is going to be significant and a rate cut is not enough,” Wilson concluded.
Of course, the hope is that historically low interest rates will boost the housing market.
The added help from the High Street banks, led by RBS and NatWest, which are offering corona mortgage holidays, should also lend further stability to the market.
Dropping down to the smaller caps, Tiziana Life Sciences (LON:TILS) was the stand-out feature with a 187% jump after it said it was fast-tracking a drug to treat COVID-19 sufferers with severe lung complications.
Proactive news headlines:
Tiziana Life Sciences PLC (LON:TILS) (NASDAQ:TLSA) has said it is to “expedite development” of a drug that it believes could help COVID-19 patients with severe lung damage. The company’s TZLS-501 is a class of monoclonal antibody (mAb) called an anti-interleukin-6 receptor, or anti-IL6R for short. On-the-ground testing in China has revealed anti-IL6R mAbs, currently approved for rheumatoid arthritis, has a role to play in treating patients.
Greatland Gold PLC’s (LON:GGP) shares surged on Wednesday as the firm unveiled what it said were “outstanding drill results” from its Havieron project in Western Australia. The AIM-listed miner said the numbers represented “one of the best set of drilling results” at the project since its farm-in partner Newcrest began exploration at the site, with three holes reporting in excess of 400 gold gram-metres and one result reporting 500 gold gram-metres.
Europa Metals Ltd (LON:EUZ) has recorded its highest grades so far from the Toral project in north-west Spain in the latest two holes to be drilled. The drilling also confirmed a thick, high-grade zone outside the current confirmed resource area with grades of 17% zinc equivalent and a bumper section of more than 25% metal.
Touchstone Exploration Inc (LON:TXP) has released the latest impressive test results from the Cascadura-1ST1 well, in the Ortoire exploration block, which in aggregate has now delivered rates in excess of 10,000 barrels oil equivalent per day (boepd). Touchstone told investors that the test results support a possible initial production range of 7,750 to 9,700 boepd, including 1,100 to 1,400 barrels of gas liquids, which is significantly ahead of the company’s pre-drill expectations.
Gaming Realms PLC (LON:GMR) is launching its Slingo Originals content with Sky Betting & Gaming (SBG) in the UK and with DraftKings in the US state of New Jersey. Under the three-year deal with SBG, the mobile gambling games firm will make its Slingo Rainbow Riches content available on the platform’s Sky Vegas online casino, which will then be followed by a further roll-out of Slingo Originals content across other SBG sites. Meanwhile, under a separate three-year partnership with US digital sports entertainment and gaming firm DraftKings, Gaming Realms will provide Slingo Originals content for the company’s New Jersey site.
Immotion Group PLC (LON:IMMO) has sought to reassure investors around its continued trading amid the coronavirus outbreak, with the company’s chief executive saying the firm is “well placed” to deal with the crisis. In an update, the provider of ‘out of home’ virtual reality (VR) experiences said recent weekly trading patterns were in line with its expectations and that at this stage it had not seen “any overall impact” attributable to the virus.
Oracle Power PLC (LON:ORCP) told investors it has received strong support for its development of the Thar coal project It was copied into a letter from the Minister of Energy for the government of Sindh to the chairman of the China Pakistan Economic Corridor (CPEC) authority which reflects the sentiments of recent talks in Karachi. The letter confirms “continued and strong support” for the project, along with approval of a letter of intent from the private power and infrastructure board.
88 Energy Ltd (LON:88E) has updated investors on the drilling operations for the Charlie-1 well, on Alaska’s North Slope. The well spud on 2 March and progress to date has seen the completion of the surface hole down to a depth of 3,500 feet, casing will now be set before the resumption of drilling.
OptiBiotix Health PLC (LON:OPTI) said it has modified its agreement with partner Sacco for its LPLDL cholesterol-lowering additive and extended it out to 2023. Instead of the original profit-sharing arrangement, it now becomes a manufacture and supply deal with pricing discounts for increasing sales volumes.
Red Rock Resources PLC (LON:RRR), the natural resource development company with interests in gold, manganese and minerals, is continuing to work on progressing its existing interests in the Democratic Republic of Congo, and reviewing new opportunities. In a statement, released after the market close on Tuesday, the company – which on 25 February 2020 announced that a new phase of exploration was to begin on the 80%-owned Luanshimba license in the country – said planning discussions have been held with its geological advisors to ensure the most cost-effective programme, and quotes for some of the geophysical work are awaited.
7.45am: Bank of England slashes interest rate
The Bank of England has made an emergency cut in interest rates just hours ahead of the new Tory government’s first Budget.
UK interest rates have been cut to 0.25% from 0.75% due to the potential impact of the coronavirus said the Bank.
It returns UK rates of borrowing back to their all-time low and will pump billions of pounds back into the economy, it said.
Fears are growing that the UK will see a lock-down similar to the situation in Italy if the coronavirus follows the pattern expected by medical experts.
A premier league match between Manchester City and Arsenal scheduled for tonight has been postponed as a precautionary measure.
Extra money for the NHS to cope with a major escalation of coronavirus is expected to be a central plank of chancellor Rishi Sunak’s Budget proposals.
The US Federal Reserve unexpectedly cut interest rates by 0.5% last week.
Financial bookmakers now expect FTSE 100 will open around 63 points higher compared to a flat to lower start predicted before the Bank's move.
6.45am: Chancellor to focus on emergency policy in first Budget
The budget announcement at 12.30pm from recently installed Chancellor of the Exchequer Rishi Sunak is widely expected to see a heavy focus on emergency policy measures to deal with the growing risks from coronavirus.
The matter struck closer to the heart of government on Wednesday morning when UK health minister Nadine Dorries became the first MP to test positive for the virus.
Sunak is also expected to unveil investment plans for northern England as part of the Conservative election manifesto in December’s election, although these and other policies may take a back seat to the escalating public health crisis.
Hopes of economic stimulus drove US markets higher overnight, with the Dow ending Tuesday’s session up 4.9% at 25,018 while the S&P 500 rose 4.9% to 2,882 and the Nasdaq climbed 5% to 8,344.
US equities were buoyed by hopes that the Trump administration will unveil stimulus measures to protect the economy from the effects of the coronavirus outbreak, however, this optimism began to fade in the Asian markets this morning.
The Japanese Nikkei 225 fell 2.3% on Wednesday while Hong Kong’s Hang Seng was down 0.6%.
On the currency markets, the pound was 0.4% higher at US$1.2934 against the dollar, although sterling could receive some catalysts from announcements made in the budget as well as UK GDP and production data due at 9.30am.
Significant announcements on Wednesday 11 March:
Finals: Prudential PLC (LON:PRU), Balfour Beatty plc (LON:BBY), Dignity PLC (LON:DTY), Breedon Group PLC (LON:BREE), FDM Group Holdings PLC (LON:FDM), Gem Diamonds Ltd (LON:GEMD), Lookers PLC (LON:LOOK), Aptitude Software Group PLC (LON:APTD), Advanced Medical Solutions Group PLC (LON:AMS), Spirax-Sarco Engineering PLC (LON:SPX), IP Group Plc (LON:IPO), Quilter PLC (LON:QLT)
Economic data: US inflation, UK GDP, UK production
Around the markets:
Sterling: US$1.2932, up 0.4%
Brent crude: US$38.02 a barrel, up 2.15%
Gold: US$1,661.41 an ounce, up 0.14%
Bitcoin: US$7,870, down 0.7%
- Rishi Sunak will unleash the largest rise in public borrowing in 30 years in his first Budget on Wednesday – Financial Times
- NMC Health has discovered almost $3 billion of debt hidden from its board that has been used for unknown purposes, in the latest disastrous revelation – FT
- The deficit in traditional pension funds is set to expand by as much as £150 billion because of the unprecedented fall in government bond yields – Times
- Sainsbury’s embarked on a £52 million advertising blitz last year to lure more shoppers to its stores after a mega-deal with Asda collapsed – Telegraph
- Britain is increasing the number of coronavirus tests it processes by 500 per cent, as authorities ramp up preparations in anticipation of “many thousands” of cases at the epidemic’s peak – FT
- Health Minister Nadine Dorries has been diagnosed with coronavirus, prompting public health officials seeking to trace anyone in contact with her - Telegraph