- FTSE 100 down 5 points
- Centrica and SSE head higher
- Ocado falls further
4.45pm: FTSE finishes flat
At the close, the FTSE 100 finished virtually flat, losing just five points to end the day at 7,347 points.
A mixed autumn statement brought spending alongside tax hikes, with a squeeze on real incomes bringing concern ahead of a difficult 2023, said Joshua Mahony, senior market analyst at online trading platform IG.
“Today’s autumn statement was meant to set out a series of measures that would bring down the debt burden which was the one side benefit of the squeeze needed to drive down inflation. However, despite introducing a host of tax measures that will further tighten the purse strings for many, Rishi Sunak ultimately opted to counteract that with a series of spending pledges that will ultimately drive UK debt upward over the near-term," Mahoney wrote.
"That decision to avoid waging war on the economy will hopefully lessen the depth of the recession, although it may ultimately last longer as elevated inflation drives real household income lower. The prospect of real disposable income heading lower for two-years does highlight the difficulties for UK businesses, with the FTSE 250 continuing to come under pressure after yesterday’s CPI-driven decline. ”
4.02pm: Shares calm after autumn statement but pound falls against the dollar
Despite the autumn statement unveiling tax rises, spending cuts, huge rises in borrowing and an expected 7% fall in living standards, the stock market seems to have taken it in its stride.
After falling as low as 7294 following the chancellor's speech, the FTSE 100 is now down just 5.76 points or 0.07% at 7345.43.
It was a slightly different story for the pound, which is down 1.11% against the dollar at US$1.178. Part of that fall comes as the dollar strengthens amid further talk of further Federal Reserve rate rises.
Against the euro the pound is also down, but less so. It is off 0.44% at €1.1411.
Gilt yields have edged higher but by no means dramatically, with the five year up 9 basis points at 3.238%.
Among the shares moving, Centrica PLC (LSE:CNA) has climbed 6.21% and SSE PLC (LSE:SSE) 2.04%.
Banks are also higher, with Lloyds Banking Group PLC (LSE:LLOY) lifted by 3.47% and NatWest Group PLC (LSE:NWG) up 2.39%.
Michael Hewson at CMC Markets UK said: "The best performing shares have, somewhat counterintuitively, been SSE and Centrica, despite the announcement of a 45% levy on the “excess profits” of low-carbon energy generators from January 1st. The levy would be applied to profits accrued above the £75/MWH level.
"The shares initially dipped lower before recovering after it was announced that the energy price cap would rise to £3k from next April, up from the current £2.5k.
"There was no windfall tax on the banking sector which is a welcome relief for the likes of Lloyds and NatWest Group, with the sector also benefiting from a reduction in the banking surcharge from 8% to 3%."
On the way down was Ocado Group PLC (LSE:OCDO), off 9.48% after hedge fund manager Kintbury Capital saw 50% downside potential in the shares.
3.42pm: OBR reveals fuel duty increase
The price of petrol and diesel is set to rise after the government plans to hike fuel duty by 23% next March, according to the small print of the OBR report.
Snuck away in the @OBR_UK #autumnstatement2022 report is a bombshell. Needless to say, I'm loading both barrels to fight this tooth & nail
A sneaky 23% rise in Fuel Duty is planned from March 2023@pritipatel @cmackinlay @johnredwood @TheABD @jkyleofficial @Iromg @TiceRichard pic.twitter.com/ND0F4tk4fG
— Howard Cox (@HowardCCox) November 17, 2022
3.35pm: Statement a step towards restoring credibility - Moody's
If chancellor Hunt was trying to restore the UK's financial credibility following the chaotic mini-budget of his predecessor, then he will be comforted by the reaction of ratings agency Moody's.
It says the planned tax increases and spending cuts go some way to making up for the turmoil caused in September.
Moody's said: "The ambitious fiscal consolidation outlined today by the UK chancellor is a further step towards demonstrating the UK's commitment to fiscal prudence after the UK's policy credibility weakened following September's fiscal statement."
But it added: "However, the polarised domestic political environment and heightened policy unpredictability may undermine efforts to deliver on fiscal consolidation, particularly in the light of strong social and political pressures on government spending."
3.15pm: US markets fall back
Over in the US, Wall Street has opened lower.
The Dow has fallen 266 points, 0.8%, to 33,288 , while the Nasdaq Composite lost 158 points, 1.4%, to 11,026 and the S&P 500 dropped 49 points, 1.2%, to 3,910.
Investors are increasingly worried that despite recently released promising CPI and PPI data for October, the Federal Reserve may not have finished raising interest rates quite yet.
The president of the St. Louis branch of the Federal Reserve seems to think so, at least.
"The policy rate is not yet in a zone that may be considered sufficiently restrictive," St. Louis Fed president James Bullard said in a speech today..
“The change in the monetary policy stance appears to have had only limited effects on observed inflation, but market pricing suggests disinflation is expected in 2023,” he added.
Kansas City Fed President Esther George expressed a similar sentiment to the Wall Street Journal on Wednesday.
“I’m looking at a labor market that is so tight, I don’t know how you continue to bring this level of inflation down without having some real slowing, and maybe we even have contraction in the economy to get there,” George said.
3.07pm: Footsie comes back off its worst levels
Energy shares were hit hard on news of the extension of the windfall tax announced in the autumn statement, but they have now staged a remarkable turnaround.
On news that the energy price cap will rise, British Gas owner Centrica PLC (LSE:CNA) has climbed 5.29%, SSE PLC (LSE:SSE) is up 2.52% and in the mid-caps Drax Group (LSE:DRX) has jumped 6.75%.
Michael Hewson at CMC Markets UK said: "The most eye catching item is a 45% levy on the “excess profits” of low-carbon energy generators from January 1st, which initially hit the share prices of SSE and Centrica, however the shares soon recovered after it was announced that the energy price cap would rise to £3k from next April, up from the current £2.5k."
Earlier this week, analysts at JPMorgan said the trio had nothing to fear from an energy profits levy, and it would be good news near term for owners of UK power generation assets such as these companies.
Banking shares are also higher after the chancellor cut the surcharge on their profits from 8% to 3%. There was also relief there was no windfall tax on the sector.
So Lloyds Banking Group PLC (LSE:LLOY) has been lifted 2.77%, and NatWest Group PLC (LSE:NWG) is up 1.74%.
There was relief among the housebuilders that the stamp duty cuts already announced would not be come in until 31st March 2025, with Persimmon PLC (LSE:PSN) putting on 1%.
Overall the FTSE 100 has recouped much of its losses, and is now down 14.05 points or 0.19% at 7337.14, having earlier fallen as low as 7294.
Craig Erlam, senior market analyst at Oanda said: "The Autumn Statement has been a long time coming after the disastrous mini-budget almost two months ago. The UK's fiscal credibility was in the gutter, the pound was crushed and borrowing costs soared. Since then, a lot has changed and today's budget highlighted just how much that is the case.
"Fully regaining credibility won't be easy but markets appear far happier now than they were back in September. The pound is lower on the day but only marginally so and the bulk of the announcements will have been priced in as they were leaked in recent days. Borrowing costs are slightly higher on the day and Bank Rate is expected to peak around 4.5%, still very high but far from the levels reached in September.
"All in all, the government may be pleased with how today has gone but time will tell whether the public agrees as everyone pores over what was quite an extensive budget."
1.42pm: More downward market moves
The FTSE continues to edge lower now the autumn statement is over.
The leading index is now down 52.46 points or 0.71% at 7298.73, while the pound is down 0.9964% at US$1.1795.
Neil Wilson at Markets.com said: "Today’s Budget will not, on the face of it, make the UK a more appealing place to invest. You feel that after this investors will look at all of this and look to move assets...which kind of counteracts the kind of ‘market credibility = lower bond yields’ idea as investors will look at the hit to growth and real spending and think maybe there is somewhere better to park their cash.
"Yields are higher, sterling is lower…not a great response but we are a long way from the mini-Budget and we should note spike in US Treasury yields and dollar strength being just as much of a driver if not more….seems to be broad risk-off move across markets and not one to pin on the UK this time. Reports of Binance freezing deposits may be hitting sentiment."
1.35pm: US jobless claims show unexpected fall
Over in the US, weekly jobless claims have come in better than forecast.
The number of Americans seeking unemployment benefits for the first time fell to 222,000 from the previous week's 226,000, itself revised up by 1,000.
Analysts had been expecting a rise to 228,000.
US Initial Jobless Claims Nov 12: 222K (est 228K; prev 225K)
- US Continuing Claims Nov 5: 1507K (est 1510K; prev 1493K)
— LiveSquawk (@LiveSquawk) November 17, 2022
1.30pm: Bank shares benefit from surcharge cut
Bank shares are higher after the chancellor cut the surcharge on their profits from 8% to 3%.
The move comes as corporation tax is raised to 25% and while it means they will pay more than most other companies, it will be less than it would have been without the change.
NatWest Group PLC (LSE:NWG) is up 1.2% while Lloyds Banking Group PLC (LSE:LLOY) has been lifted by 1.1%.
1.02pm: Market reaction to Hunt's statement
The overall market reaction to the autumn statement has seen shares fairly unmoved but the pound fall further and gilt yields edge higher.
But the initial moves are not always where we end up. Certainly Kwasi Kwarteng's mini-budget did not scare the horses too much at first, that came once the implications of unfunded tax cuts sunk in.
Still, at the moment the FTSE 100 remains roughly where it has been most of the day so far, down 46.35 points or 0.63% at 7304.84.
But the pound's decline continues and is now down 0.8213% at US$1.1816.
The gilt market has seen yields rise amid the forecast hefty increase in government borrowing.
The five year yield is up 9 basis points at 3.273%, compared to the 3.214% before the chancellor started speaking.
The ten year yield is up 7 basis points at 3.225%. Before the statement it was 3.182%.
12.45pm: Oil giants face higher windfall tax
The extension of the energy windfall tax has also seen shares in the oil companies edge lower, but not as much as the generators.
BP PLC (LSE:BP.) is down 0.56% while Shell PLC (LSE:SHEL, NYSE:SHEL) is 0.36% lower.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: ‘’Share prices of energy generating companies have retreated rapidly as it became clear that the Treasury will scoop up more money which has been falling into their profit baskets as gas prices soared.
" A much bigger slice of profits of energy giants such as BP and Shell will now also be raked in, with the energy profits levy increased from 25 per cent to 35 per cent. The door was inched open even further on the case for a windfall tax following comments made by Shell’s outgoing boss, Ben Van Beurden, that the tax burden had to fall on the energy sector to help the poorest in society. That’s partly why the reaction has been relatively muted in terms of their share prices..
"Wind farm operator Orsted had already said such a tax is fair if companies are making windfall profits from current high energy prices. However, it along with other generators had already hedged the price of their output well in advance of the current crisis, so won’t have benefited fully from the surge on international exchanges so the nuances of how the tax will work will be important. Now rumours of the levy on electricity generators have become reality shares have fallen back further, with SSE dropping 3.5%, Orsted falling 2.2% and Drax, 3% lower...
"For the government there is a risk that energy prices will continue to fall back, which will limit what can be creamed off. Brent crude has dropped back to below $92 a barrel as worries about weakening demand have risen and geo-political tensions have eased a little. Gas prices have also retreated, and are around 70% below the summer peak, but they have been highly volatile and may tick back upwards as cold weather is set to sweep into Europe."
12.38pm: Hefty borrowing increase helps pull pound lower
The pound has slipped further over the course of chancellor Hunt's autumn statement, which lasted around 53 minutes and unveiled £55bn of tax rises and spending cuts.
It was down 0.69% at US$1.1831, having been down 0.54% at the start of the speech following the forecasts of a hefty increase in government borrowing.
The UK is forecast to borrow £177bn or 7.1% of GDP this financial year, up from an expectation of £98bn back in March.
???? Borrowing will hit £177bn this year and drop to £140bn, Hunt confirms. It's still £69bn by 2027/28. In March, the OBR reckoned borrowing would fall to £31.6bn in 2026/27. Big GDP downgrade is whacking revenues hard
— Jack Barnett (@__JackBarnett) November 17, 2022
Meanwhile the FTSE 100 was barely moved by the announcements, down 41.9 points or 0.57% at 7309.29.
12.10pm: Business rate support package
A revaluation of properties for business rates will go ahead, but there will be a support package to help companies in the current difficult times.
Businesses are struggling with prices rising and growing uncertainty.
This is why the government is providing a £13.6bn package of business rates support, to help businesses through these tough times. #AutumnStatement pic.twitter.com/zuxalJ7RgF
— HM Treasury (@hmtreasury) November 17, 2022
11.59am: Energy shares down
Energy shares are lower after the chancellor extended the energy windfall tax, saying he has no objection to such taxes if they genuinely are about windfall profits.
Hunt said: "From January 1st until March 28 we will increase the energy profits levy from 25% to 35%.
"The structure of our energy market also creates windfall profits for low carbon electricity generation. So from January 1st we’ve decided to introduce a new temporary 45% levy on electricity generators. Together these measures raised £14bn."
Drax Group (LSE:DRX) is down 4.04%, SSE PLC (LSE:SSE) is off 3.19% and Centrica PLC (LSE:CNA) is off 1.52%.
11.50am: GDP to fall by 1.4% next year - OBR
Unlike Kwasi Kwarteng's mini-budget, this statement is accompanied by forecasts from the Office for Budget Responsibility.
One of those is that the OBR expects inflation to be 9.1% this year and 7.4% next year. As a reminder it is currenty 11.1%.
It says the UK is now in recession. This year the OBR expects growth of 4.2% compared to a 3.8% rise forecast in March.
Next year GDP is expected to fall by 1.4% then rise by 1.3% a year later.
Our November 2022 GDP growth forecast. Full forecast published after the Chancellor’s #AutumnStatement speech pic.twitter.com/U1iKT9KFaC
— Office for Budget Responsibility (@OBR_UK) November 17, 2022
11.42am: US markets set for weak start
US stocks are expected to open lower with the feel-good factor from news of easing inflationary pressures dented by worrying earnings from the likes of retailer Target and a pick-up in retail sales.
The mixed picture of the wider economy emerging from the latest data and earnings appears to suggest that there will be further US interest rate increases in the current cycle even if a recession is likely.
Futures for the Dow Jones Industrial Average were down 0.5% in pre-market trading, while those for the S&P 500 were also 0.5% lower, and contracts for the Nasdaq-100 shed 0.4%.
“Better-than-expected US retail sales didn’t please investors yesterday, as it fuelled, again, inflation expectations,” noted Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
The higher inflation expectations fuelled the hawkish Federal Reserve expectations and in turn recession worries, she added.
Advanced retail sales for the month of October increased by 1.3%, topping expectations of a 1.2% increase. Excluding autos, the figure was also 1.3%, ahead of expectations of 0.6%.
“Sour earnings from Target, which highlighted that nice-to-have stuff like clothes and electronics didn’t sell well in the latest quarter, because of rising prices, didn’t help lift investor mood,” said Ozkardeskaya.
Meanwhile, highlighting the recession theme, JP Morgan economists have said they expect the US to enter a mild recession next year because of rising interest rates and the tightening monetary conditions.
Elsewhere, the prospect of slower global economy, along with the de-escalation of geopolitical tensions on news that the rockets that hit Poland this week probably landed by accident, pulled oil prices lower.
11.39am: Markets wary as Hunt speaks
As chancellor Jeremy Hunt stand to deliver his statement, here is the state of play.
The FTSE 100 is down 40.25 points or 0.55%, and the pound is off 0.54% against the dollar at US$1.1849.
In the gilt market, the 5 year yield is up 3.8 basis points at 3.214%, the 10 year is ahead 3.6 basis points at 3.182% while the 20 year is 0.5 basis points higher at 3.523%.
Follow our live blog on Hunt's statement here.
11.08am: Eurozone inflation continue to rise
Over in the eurozone and inflation continues to surge although it has come in lower than initially expected..
The euro area annual inflation rate was 10.6% in October 2022, up from 9.9% in September, according to Eurostat.
This is the highest rate since the introduction of the euro 23 years ago, but is a little less than the flash reading of 10.7%. A year earlier, the rate was 4.1%.
Euro area annual #inflation up to 10.6% in October https://t.co/43xXMIkUrz pic.twitter.com/m7oFZ7ZdIJ
— EU_Eurostat (@EU_Eurostat) November 17, 2022
In the European Union as a whole, annual inflation was 11.5% in October 2022, up from 10.9% in September. A year earlier, the rate was 4.4%.
10.32am: Chancellor keen not to spook the markets
Markets are drifting as investors wait for the autumn statement later this morning, but remain in the red.
The FTSE 100 is down 26.74 points or 0.36% at 7324.45, while the mid-cap FTSE 250 is 0.26% lower at 19,062.08.
The chancellor will be hoping to placate the markets and not repeat the chaos following Kwasi Kwarteng's mini budget, said AJ Bell investment director Russ Mould
“If the mini-budget was what made the UK economy and its assets sickly, today is the day on which some painful medicine is delivered in the form of the Autumn Statement..
“By trailing many of the measures Chancellor Jeremy Hunt has gone out of his way to avoid any surprises, with the key aim to placate international investors in gilts and the pound. These are the markets the government will be watching as they look to gauge the reaction."
Here's a rundown of some of the things to expect from Hunt's statement.
10.15am: Hunt warns of difficult decisions to restore stability
The Treasury has released a video ahead of the autumn statement, with chancellor Jeremy Hunt warning of difficult decisions but promising to build a stronger economy and "look after our most vulnerable."
The UK is facing the effects of the global economic crisis.
Difficult decisions need to be taken now to drive down inflation - the hidden tax eating into household budgets.
The Cabinet has set out why we are prioritising stability, growth and public services ⬇️ pic.twitter.com/VOUg5AMBeh
— HM Treasury (@hmtreasury) November 17, 2022
9.50am: Pound loses early gains against the dollar
The slide continues although there is nothing too dramatic ahead of the chancellor's autumn statement measures.
The FTSE 100 is currently down 40.63 points or 0.55% at 7310.56.
The leading faller at the moment is Ocado Group PLC (LSE:OCDO), down 5.29% as it continues its recent weakness. Sentiment has not been helped by hedge fund Kintbury Capital hedge fund saying it expects a 50% downside in the shares at best.
Both Halma PLC (LSE:HLMA) and Spirax-Sarco Engineering (LSE:SPX) have fallen back following their latest update, down 5.02% and 4.7% respectively.
The pound climbed to as high as US$1.958 against the dollar but is now down 0.27% at US1.1881.
But it is virtually flat against the euro at €1.1463.
9.20am: Autumn statement all about restoring credibility
There may not be any major surprises in the autumn statement, says Neil Wilson at Markets.com.
"The messaging from the Treasury thus far has been very clear – heapings of fiscal discipline and lashings of austerity, no uncosted borrowing," he said. ".. It’s about restoring credibility in the financial markets and very little else. A surprise or two? Chancellors love to pull a rabbit or two out of the hat and fiscal credibility goes hand in hand with winning the next the election as far as the Tories go, so it might not be as horrendous as some of the various test balloons floated by the Treasury in recent weeks would suggest.
"A credibility premium, though, is worth more right now and the surprises will be saved up for next year ahead of the election…when they can apply some soothing tax cuts and say they could only do that because of the difficult steps taken in 2022."
Susannah Streeter, senior invesment and markets analyst at Hargreaves Lansdown, agrees the statement needs to restore credibility after the chaotic mini-budget.
But there is a risk the measures could hamper economic recovery.
She said: "The UK government’s Autumn Statement will mark a complete about turn from the Truss administration’s plans for a sugar rush boost to growth through tax cuts which sparked mayhem on bond markets and saw the UK’s risk premium shoot up. Gilt yields have come down significantly since the September scare which threatened to destabilise the UK financial system, and the Sunak administration is desperate to hold onto credibility.
"By taking all these steps the government hopes to fill in the fiscal ‘black hole’ which has emerged because successive Conservative ministers have said they want to see net debt falling by 2025-2026. Sunak and Hunt are trying to dance to a tune they think the bond markets are playing, but by keeping so strictly to their perceived rules, they risk playing it too safe, and pushing the prospects of economic recovery far into the distance.‘’
8.54am: Halma falls after update
Safety equipment firm Halma PLC (LSE:HLMA) is high among the fallers in the leading index after underwhelming half year results.
Pretax profits dropped 13% to £145.5mln, although the decline was due to a gain on disposal last year of £34mln which was not repeated.
It also said half year revenues had reached record levels, its order book was strong and it was on track for further progress in the second half.
But cash conversion of 63% was below its 90% target after investment in its inventory to ease supply chain problems and support its order book.
Its shares have fallen 3.36% following the update.
Elsewhere Hargreaves Lansdown PLC (LSE:HL.) is down 1.79% to 855.6p after analysts at RBC cut their recommendation from outperform to sector perform.
They also reduced their price target from 1650p to 1050p, but this is still much higher than the current market price.
Overall the FTSE 100 is now down 24.66 points or 0.34% to 7326.53.
Victoria Scholar, head of investment at interactive investor said: “European markets have opened mostly higher with the DAX outperforming thanks to strong results from Siemens while the FTSE 100 is lagging behind, trading below the flatline [ahead of the autumn statement]."
Just over 6 points of the decline can be attributed to companies seeing their shares go ex-dividend, including Pershing Square Holdings (LSE:PSH) which is down 1%.
8.34am: US Fed members hawkish on rate rises
The hawkish signals from US Federal Reserve officials came thick and fast yesterday.
Kansas City Fed president Esther George cautioned about prematurely ending rate hikes in a Wall Street Journal interview, saying that “the more important question for this committee, looking out over next year, is being careful not to stop too soon”
Mary Daly, president of the San Francisco said it was reasonable to think rates could rise to between 4.75% and 5.25%, with the top end of that range higher than the 4.92% currently priced in by markets.
And Fed governor Christopher Waller said he was becoming more comfortable with the next rate rise being 50 basis points rather than 75 after the more benign inflation readings recently.
But he added that getting inflation down to target would require rate rises into next year: "We still have a ways to go."
8.13am: Markets calm ahead of chancellor's statement
Leading shares have slipped back ahead of the delayed autumn statement, with increased taxes and spending cuts widely expected.
With a decline on Wall Street after poor results from Target and some hawkish comments from Federal Reserve members, the FTSE 100 is down 11.16 points or 0.15% at 7340.03.
But investors are mainly keeping their powder dry until chancellor Jeremy Hunt has made his pronouncements.
Ipek Ozkardeskaya, senior analyst at Swissquote, said: "The UK braces for ‘austerity in steroids’ wrote Bloomberg, reminding that Sunak government must fill in a £55bn hole by increasing taxes and cutting spending.
"For investors, though, austerity means a more stable budget, less negative pressure on the sovereign bonds, and an ideally stronger British pound...
"Maybe we won’t see a kneejerk positive reaction right away, because politicians tend to overpromise and underdeliver. But in all cases, we are confident that the budget announcement under Sunak won’t trigger the same chaos as under Liz Truss."
Among the early movers, Royal Mail owner International Distributions Services PLC (LSE:IDS) is down 3.63% after it reported an operating loss of £163mln compared to a profit of £311mln this time last year.
The company was hit by weak parcel volumes, an inability to deliver productivity improvements and the impact of the current industrial dispute.
7.49am: Gilts rise, Sterling stands its ground against US dollar as autumn statement approaches
Today brings the delayed UK autumn budget, with tax policy and spending cuts front and centre of expected policy- it’s just a matter of how much and how severe.
With the Office for Budget Responsibility forecasting an excess of £70bn to the government’s borrowing budget, chancellor Jeremy Hunt’s acknowledged that "we are going to see everyone paying more tax” in a BBC interview, but the government is also wary of hobbling business investment at the risk of stagflation.
Not to mention that adding more pain to the cost-of-living crisis would be both unreasonable and a political own goal.
Yet it comes at a time when 10-year gilt yields just fell to their lowest level in two months while Cable has been making solid gains, indicating at least some optimism in the UK’s economic prospects.
Despite the pair cutting back 20 pips this morning, GBP/USD still holds strong at US$1.189.
GBP/USD awaits chancellor Hunt’s autumn statement – Source: capital.com
EUR/GBP has been rangebound for the past two weeks and this morning was no different. The pair hit a high of 87.3p this morning before cutting back to 87.15p.
Euro area inflation data is due this morning, with forecasts pointing to a record high of 10.7% year on year.
Against that backdrop, EUR/USD is in an indecisive mood, with the pair cutting back to US$1.036 before inching higher to US$1.039 during this morning's Asia trading session.
7.00am: FTSE 100 seen lower ahead of Autumn Statement
FTSE 100 set to open slightly lower with the chancellor taking centre stage as he delivers his autumn statement which is expected to contain a raft of tax increases and spending cuts.
Spread betting companies are calling the lead index down by around 10 points.
Jeremy Hunt has already warned that some “eye-watering” decisions need to be made on spending cuts and tax increases.
Michael Hewson chief market analyst at CMC Markets UK said: “Over the past few weeks, we’ve heard an array of estimates of the size of the fiscal black hole at the heart of the public finances, ranging from £40bn to £55bn, however this week we got a new one in the form of a higher number, this latest one being £70bn, begging the question as to how big the fiscal hole is.”
“While we know a good proportion of this is due to higher borrowing costs due to high inflation, as well as the potential for a slowdown in the UK economy, it seems odd that the size of the hole has gone up at the same time UK gilt yields have gone down, along with natural gas prices.”
Before that, there will be a busy morning of financial news, including from Royal Mail owner International Distributions Services PLC (LSE:IDS), which will report half-year results amid a continued uncomfortable atmosphere for investors, management and workers.
Burberry Group PLC (LSE:BRBY), Great Portland Estates (LSE:GPOR), Halma PLC (LSE:HLMA) and Intermediate Capital Group (LSE:ICP) are other companies reporting today.
In the US markets ended a subdued day the wrong side of the line with all three major indices ending in negative territory.
At the close the Dow Jones Industrial Average was down 39 points, or 0.12%, to 33,554, the S&P 500 fell 33 points, or 0.83%, to 3,959, and the Nasdaq Composite dipped 174 points, or 1.54%, to 11,184.