London’s blue chips eked out a small gain on Friday as Kwasi Kwarteng was sacked as UK chancellor in the afternoon just 38 days after his appointment, with Prime Minister Liz Truss continuing her attempts to unravel the disastrous mini-budget.
Amid the swirling rumours in recent days, Truss performed yet another U-turn, scrapping her plans to block a planned rise in corporation tax, and summarily dismissing Kwarteng as chancellor.
The FTSE 100 index closed up 8.52 points, 0.1%, at 6,858.79. The index closed the week down 1.9%.
The FTSE 250 ended up 103.56 points, 0.6%, at 17,032.82, losing 1.9% over the week. The AIM All-Share closed up 4.03 points, 0.5%, at 779.80. It lost 3.6% this week.
The Cboe UK 100 ended up 0.3% at 686.84, the Cboe UK 250 closed up 0.6% at 14,584.91, and the Cboe Small Companies ended up 1.1% at 12,275.66.
The pound was quoted at $1.1235 at the London equities close Friday, lower compared to $1.1340 at the close on Thursday.
Truss’s government will hike corporation tax, raising £19 billion from UK companies after U-turning on a pledge made in the mini-budget.
After three weeks of pressure following Chancellor Kwarteng’s fiscal statement, he was shown the door on Friday alongside one of the biggest tax cuts he announced.
It would have cancelled the plan, introduced by former chancellor Rishi Sunak, to bring the corporation tax rate to 25% in April next year from 19% currently.
The rate is levied on businesses with more than £250,000 in profit every year.
‘As U-turn’s go it’s a doozy. The freeze in corporation tax wasn’t something most households were talking about around the dinner table, but it was the jewel in the crown of the new PM’s plans to supercharge UK economic growth,’ said AJ Bell analyst Danni Hewson.
‘It may have, temporarily, been an incentive for businesses to overlook the tangle of red tape and additional costs associated with trading in a post Brexit world. But at what cost? Companies had already priced in the new tax rates which had been well signposted and at 25% the UK will still be competitive,’ Hewson continued.
Truss has appointed former foreign secretary Jeremy Hunt as the new chancellor of the exchequer after Kwarteng's sacking.
The choice of Hunt, a prominent backer of her rival Sunak in the Tory leadership contest, will be seen as an attempt to restore stability after weeks of turmoil in the wake of Kwarteng's mini-budget.
In European equities on Friday, the CAC 40 in Paris ended up 0.9%, while the DAX 40 in Frankfurt ended up 0.7%.
The euro stood at $0.9758 at the European equities close Friday, down against $0.9772 at the same time on Thursday.
Against the yen, the dollar was trading at JP¥148.38, surging to the highest levels in decades, compared to JP¥147.19 late Thursday.
Stocks in New York were lower at the London equities close, with the DJIA down 0.7%, the S&P 500 index down 1.4%, and the Nasdaq Composite down 1.8%.
Wall Street was pulled lower by the latest University of Michigan 1-year inflation expectations survey, which accelerated to 5.1% in October from 4.7% in September. Stagnant US retail sales figures did little to lift the mood, despite fairly solid quarterly banking earnings from Wells Fargo, Citigroup, and JPMorgan.
According to data from the Census Bureau, US retail sales in September remained unchanged from revised figures in August, which was below market consensus expecting monthly growth of 0.2%, according to FXstreet. September's flat figure slowed from August's 0.4% growth from July.
In London, Mondi closed up 2.0%. The Weybridge-based paper and packaging firm said its performance in the third quarter was strong as high selling prices helped offset significant cost pressures, boosting profit.
However, Mondi warned that significant political and economic uncertainties remain, expecting inflationary pressures on its cost base to continue in the fourth quarter.
Underlying earnings before interest, tax, depreciation and amortisation from continuing operations, excluding those in Russia, jumped by 55% to €450 million for the third quarter to September 30 from €290 million a year before.
In the mid-caps, International Distributions Services plunged 10%. Formerly known as Royal Mail, the FTSE 250 firm warned of an interim loss as its UK arm - now called Royal Mail - and some 10,000 jobs cuts following strike action.
For the six months to September, Royal Mail suffered a £219 million adjusted operating loss, swinging from £235 million profit a year earlier. Revenue fell 11% to £3.65 billion from £4.07 billion. IDS reported a £70 million profit hit from industrial action.
There could be more strikes to come too. It has been threatened, but not yet ‘formally notified’ of a further 16 days of industrial action in November and December, around the key Christmas period.
Based on current estimates, Royal Mail may need to undertake between 5,000 and 6,000 redundancies between now and August 2023. IDS explained Royal Mail's workforce will have roughly 10,000 fewer roles on August 2023 than it did a year earlier.
On AIM, Morses Club added 21%. The home-collected credit provider also is going through the process of a scheme of arrangement to deal with customer redress claims.
Brent oil was quoted at $91.96 a barrel at the London equities close Friday, down sharply from $94.07 late Thursday. Gold was quoted at $1,648.48 an ounce, down against $1,665.31.
On Monday, there will be third-quarter results from miner Rio Tinto, annual results from semiconductor designer EnSilica, and first-quarter results from City of London Investment Trust.
The economic calendar for Monday has Japan industrial production and retail sales, as well as UK house price index overnight. Of particular interest next week will be UK and EU consumer price inflation figures on Wednesday,
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