FTSE rises but tax policy reversal a ‘sticking plaster’
LONDON markets have closed in the green after an extraordinarily turbulent week that ended with the Chancellor ousted and the Prime Minister reversing a key policy in their fiscal plan.
It has been a difficult week for the FTSE 100 which closed at an 18-month low on Wednesday that shaved off 0.9% of the index’s value.
But it seems investors were reasonably happy about Kwasi Kwarteng getting the sack after just 38 days as Chancellor, during which time mortgage rates soared and the pound plummeted.
The FTSE 100 ended the session 0.12% higher, or 8.52 points, at 6,858.79.
Meanwhile, the pound and UK Government bonds came back under pressure despite the Prime Minister’s U-turn on corporation tax rises, which will see the Government raise more than £18 billion a year.
Sterling went up in value earlier on Friday after the Chancellor’s exit was confirmed but fell back after Liz Truss’s press briefing, suggesting that investors think that reinstating the corporation tax rise will not go far enough to claw back extensive Government debt.
The pound was down 1% against the dollar at 1.1211 at close. It was also down 0.66% against the euro at 1.1509.
Danni Hewson, a financial analyst at AJ Bell, said: “Markets were terrified that the ‘mini-budget’ was unfunded and fiscally irresponsible.
“The new regime was untried and seemingly unwilling to follow the accepted playbook for updating, in this case upending, fiscal policy.
“The writing was on the wall when markets surged in anticipatory delight on the news that another postbudget U-turn was imminent and moves on corporation tax have gone a long way to bolstering sentiment today.
“But it is a sticking plaster that’s already curling at the edges.”
It has been a choppy session for markets elsewhere in Europe but the top indices also closed in the green. The German Dax was up by 0.93% and the French Cac was 1.18% higher. entiment
was not so good in the US and the S&P 500 was down 1.7% when European markets closed, while Dow Jones had dropped 0.86%.
Hospitality chain Loungers
said it was planning to open 19 more sites over the rest of the financial year, adding to the 206 venues that it currently has in its estate. The firm, which owns chains
Cosy Club and Lounge, hailed a strong performance of its new venues. Its share price moved up by nearly 1%.
FTSE 100-listed packaging and paper firm Mondi echoed the optimistic sentiment and revealed its earnings more than doubled over the third quarter. The global firm said that higher average selling prices of its products had more than offset cost inflation of key materials including wood. Its share price was up by 2%.
The biggest risers on the FTSE 100 were Ocado Group, up 21p to 456.8p, Segro, up 27.6p to 739.4p, Unite Group, up 23.5p to 829.5p, Rentokil Initial, up 13.3p to 500.2p, and United Utilities Group, up 20.8p to 854.4.