Shares ended mixed in London on Wednesday as the UK government delivered its long-awaited tax plan, which though a ‘difficult choice,’ was largely in line with investor expectations.
The FTSE 100 index closed down 59.98 points, or 0.7%, at 8,159.63. The FTSE 250 ended up 71.33 points, or 0.4%, at 20,694.12, and the AIM All-Share closed up 4.0%, or 28.82 points, at 744.61.
The Cboe UK 100 ended down 0.6% at 818.53, the Cboe UK 250 closed up 0.6% at 18,273.84, and the Cboe Small Companies ended up 0.1% at 16,643.00.
UK Chancellor of the Exchequer Rachel Reeves said a 50% relief would apply in all circumstances on inheritance tax for shares on the alternative investment market, and other similar markets, setting the effective rate of tax at 20%.
On capital gains tax, Reeves will increase the lower rate of capital gains tax to 18% from 10%, and the higher rate to 24% from 20%, while maintaining the rates of capital gains tax on residential property at 18% and 24%.
Meanwhile, air passenger duty will rise, adding up to £2 to the cost of an economy ticket for a short-haul flight. Private jet users will be hit by a 50% hike in air passenger duty, Reeves added.
As part of the budget, Reeves also announced changes to employers’ national insurance, which she said would raise as much as £25 billion as part of a £40 billion package to stabilise the UK’s public finances.
Calling it a ‘difficult choice’, Reeves said employers’ national insurance contributions will rise by 1.2 percentage points to 15% in April 2025, and the threshold for paying them will fall from £9,100 per year to £5,000.
Reeves confirmed there would be no changes to income tax, national insurance contributions by employees, or VAT. She added that income tax thresholds will not be frozen beyond the current freeze running to 2028-29. They will then be uprated in line with inflation.
Reeves said the freeze on fuel duty will continue next year, maintaining the existing 5 pence cut as she said that increasing it ‘would be the wrong choice’.
‘Make no mistake this was a bleak budget for taxpayers, but everyone saw it coming a mile off. The inordinate wait, doom-laden messaging, rampant speculation, and gradual leaking of key fiscal policies dented confidence and has inevitably led some people to make rash and, in some cases, irrevocable financial decisions. This is a new government, and it’s natural to try to get all the bad news out in the open early doors. From a low base, it’s easier for things to only get better. But the way this Budget has been scheduled and delivered, irrespective of the policies, has fostered a climate of fearful uncertainty,’ said AJ Bell’s Laith Khalaf.
‘With much of the burden falling on employers through higher National Insurance, there will be relief in some quarters, alongside misery in others. In particular, the decision not to freeze income tax thresholds out to 2030 will be welcomed by many, as will the continued freeze on fuel duty. But perhaps the fact some people will be counting their blessings despite £40 billion of tax hikes simply underlines the extent of the government’s miserable messaging in the run up to this Budget.’
In European equities on Wednesday, the CAC 40 in Paris ended down 1.1%, while the DAX 40 in Frankfurt ended down 1.1%.
The eurozone’s gross domestic product climbed by more than anticipated in the third quarter of the year, preliminary Eurostat data showed on Wednesday.
The eurozone seasonally adjusted GDP rose by 0.4% in the third quarter, up from 0.2% in the second. It outperformed FXStreet-cited consensus expectations of a 0.2% climb.
On-year, the seasonally adjusted GDP in the eurozone climbed by 0.9% in the third quarter, up from 0.6% in the second, and beating expectations of a 0.8% rise.
Separate data from Destatis showed that German consumer prices rose 2.0% in October from a year before, accelerating from 1.6% in September. This was faster than FXStreet-cited consensus of a 1.8% rise.
On a monthly basis, prices rose 0.4% in October, having been flat in September and falling 0.1% in August. The market had expected a 0.2% rise in October, according to FXStreet-cited consensus.
The harmonised consumer price index - which allows for EU-wide comparison - rose 2.4% annually in October, accelerating from 1.8% in September. It came in higher than the consensus of 2.1%.
On a monthly basis, harmonised prices rose 0.4% in October, compared to a 0.1% fall in September.
The pound was quoted at $1.3006 at the London equities close on Wednesday, up compared to $1.2991 at the close on Tuesday.
The euro stood at $1.0863 at the European equities close on Wednesday, against $1.0795 at the same time on Tuesday. Against the yen, the dollar was trading at JP¥153.03, down compared to JP¥153.56 late Tuesday.
In London, Standard Chartered rose 4.1% as the Asia-focused lender upped annual guidance. It now predicts operating income growth of 10% this year at constant currency. It had previously predicted a rise of 7%. It also raised its shareholder distribution target for the 2024 to 2026 period.
Anglo American fell 3.9% as one-time suitor BHP said it has ‘moved on’. BHP Chair Ken MacKenzie said at the miner’s annual general meeting in Brisbane, Queensland, that BHP believed the two companies could have created ‘something unique and special’. He described a BHP-Anglo tie-up as a ‘one plus one equals three opportunity’.
BHP shares fell 1.5%.
Packaging firm Smurfit WestRock added 9.7%. It achieved net sales of $7.67 billion in the third-quarter of 2024. In the third-quarter of 2023, sales of $2.92 billion were reported, though this did not include the WestRock business. The combination between Smurfit and WestRock took effect in July.
Adjusted earnings before interest, tax, depreciation, and amortisation totalled $1.27 billion in the third-quarter, compared to $525 million in the WestRock-less prior year.
Stocks in New York were higher at the London equities close, with the DJIA up 0.3%, and the S&P 500 index and the Nasdaq Composite up 0.1%.
The US economy continued to grow in the third quarter, though at a slower pace than in the second quarter and below market expectations, data from the Bureau of Economic Analysis revealed on Wednesday.
Real gross domestic product increased at an annual rate of 2.8% in the third quarter of 2024, according to advance estimates from the BEA. This was below FXStreet-cited market consensus of 3% growth. In the second quarter, US real GDP increased by 3.0%.
The personal consumption expenditure price index rose 1.5% in the third quarter, slowing from an increase of 2.5% in the prior quarter. The core PCE index, which excludes food and energy prices, increased 2.2%, below the prior 2.8% increase. The latest figure was a notch ahead of market consensus of 2.1% growth.
Brent oil was quoted at $72.17 a barrel at the London equities close on Wednesday from $71.11 late on Tuesday.
‘Crude oil futures are currently reflecting reports that efforts could be deployed to discuss a diplomatic resolution to the ongoing conflict. Suggestions that a ceasefire could be achieved in the coming weeks might ease concerns about further escalation impacting the oil market,’ said Joseph Dahrieh, managing principal at Tickmill.
Israel’s security cabinet is discussing the terms of a truce with Hezbollah in south Lebanon, where Israeli troops are conducting a ground offensive, Energy Minister Eli Cohen said Wednesday.
Separately, mediators seeking a Gaza ceasefire are set to propose a truce of under a month to Palestinian militants Hamas, a source with knowledge of the talks told AFP.
‘This potential resolution could reinforce the bearish sentiment in the market, as traders may expect reduced geopolitical risks, leading to lower prices in the short term,’ Dahrieh said.
Gold was quoted at $2,786.80 an ounce at the London equities close on Wednesday against $2,765.34 at the close on Tuesday.
In Thursday’s UK corporate calendar, there are trading statements from Coca-Cola HBC, Haleon, PPHE Hotel, Smith & Nephew, and Zotefoams. There are also full-year results from Grit Real Estate and Seeing Machine, and third quarter results from Shell and Spectris.
The economic calendar for Thursday has unemployment and CPI from the eurozone, retail sales and export and import prices from Germany, as well as a handful of data from the US, including initial jobless claims.
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