London close: FTSE rises as Truss unveils energy support package

London stocks closed up on Thursday after new prime minister Liz Truss announced details of an energy bill support package.

The FTSE 100 ended 0.3% higher at 7,262.06, while sterling was 0.5% lower versus the dollar at 1.1481.

Truss announced earlier that household energy bills will be capped at £2,500 for the next two years, saving the average household around £1,000 a year. The move is in addition to the previously announced £400 energy bill discount, while green levies costing £150 will also be temporarily removed.

Typical household gas and electricity bills had been set to rise from £1,971 to more than £3,500 on 1 October, with the potential to reach £6,000 in January 2023, when the next price cap review was due.

Energy costs for businesses and public sector bodies such as schools will be also capped, though only for six months.

But Truss dismissed calls for a windfall tax to fund the price freeze, arguing it would discourage the investment needed to secure domestic energy supplies.

It is estimated that the package of measures will cost around £150bn, although the government has not as yet confirmed any figures.

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: "The energy package has been unwrapped. There was huge disappointment that there wouldn’t be more help for those on the lowest incomes and the most vulnerable, but the energy price freeze will ease some of the pain we were expecting in October and beyond. This is going to be the only welcome freeze we face this winter.

"The horrendous scale of the energy crisis required the same dramatic level of intervention as the Covid crisis and the financial crisis. Today’s energy freeze is certainly a bold step, which is expected to cost over £100 billion. It looks as though that will be paid for through general taxation. And while it comes as a relief that it won’t mean higher bills for longer, it raises the question of whether the government will need to start clawing back the cash while energy prices are still higher than they were this time last year."

Investors were also digesting an unprecedented 75 basis point rate hike by the European Central Bank.

The Bank lifted the key interest rate to 1.25%, as widely expected, and the deposit rate to 0.75% from zero, as it looks to tackle surging inflation.

It now expects inflation to average 8.1% this year, 5.5% in 2023, and 2.3% in 2024. In the year to August, eurozone inflation rose to a record high of 9.1% from 8.9% a month earlier, with energy prices up a whopping 38.3% year over year.

In addition, the Bank slashed its economic growth expectations for the bloc in 2023 to 0.9% from 2.1%.

"This major step frontloads the transition from the prevailing highly accommodative level of policy rates towards levels that will ensure the timely return of inflation to the ECB’s 2% medium-term target," the ECB said. The Bank said it "expects to raise interest rates further, because inflation remains far too high and is likely to stay above target for an extended period".

In equity markets, animal genetics company Genus and hydrocarbon exploration and production group Energean were high risers after well-received results.

On the downside, Darktrace tanked after tech investment firm Thoma Bravo said it will not be making an offer for the cybersecurity company.

AJ bell slumped after Jefferies downgraded the shares to ‘underperform’ from ‘hold’, citing a "darkening near-term outlook and a relatively high multiple".

Elsewhere, Primark owner Associated British Foods slid as it warned that adjusted operating profit and earnings per share for the next financial year will be lower than this financial year.

Turnaround specialist Melrose Industries fell after announcing plans demerge its GKN Automotive and GKN Powder Metallurgy businesses and list the new holding company.

Market Movers

FTSE 100 (UKX) 7,262.06 0.33%
FTSE 250 (MCX) 18,878.29 0.36%
techMARK (TASX) 4,293.96 1.13%

FTSE 100 - Risers

Antofagasta (ANTO) 1,151.00p 4.16%
Experian (EXPN) 2,697.00p 2.90%
Pershing Square Holdings Ltd NPV (PSH) 2,840.00p 2.90%
Standard Chartered (STAN) 592.80p 2.77%
Ocado Group (OCDO) 751.20p 2.37%
Airtel Africa (AAF) 137.10p 2.24%
Prudential (PRU) 938.00p 2.22%
Rentokil Initial (RTO) 545.60p 2.17%
Dechra Pharmaceuticals (DPH) 3,248.00p 2.14%
Smiths Group (SMIN) 1,522.00p 2.08%

FTSE 100 - Fallers

Melrose Industries (MRO) 125.45p -8.86%
Associated British Foods (ABF) 1,346.00p -7.49%
B&M European Value Retail S.A. (DI) (BME) 344.10p -5.02%
Tesco (TSCO) 237.40p -4.77%
Sainsbury (J) (SBRY) 197.60p -4.54%
Next (NXT) 5,816.00p -3.84%
Abrdn (ABDN) 149.65p -2.60%
3i Group (III) 1,153.00p -2.21%
Hargreaves Lansdown (HL.) 832.20p -2.12%
Intermediate Capital Group (ICP) 1,256.00p -1.99%

FTSE 250 - Risers

Genus (GNS) 2,798.00p 16.68%
Energean (ENOG) 1,411.00p 13.33%
Drax Group (DRX) 738.00p 6.80%
Chrysalis Investments Limited NPV (CHRY) 73.30p 5.01%
Aston Martin Lagonda Global Holdings (AML) 456.70p 4.53%
Bellevue Healthcare Trust (Red) (BBH) 173.00p 4.22%
SSP Group (SSPG) 216.60p 3.84%
XP Power Ltd. (DI) (XPP) 1,866.00p 3.78%
Molten Ventures (GROW) 348.60p 3.75%
Polymetal International (POLY) 213.60p 3.69%

FTSE 250 - Fallers

Darktrace (DARK) 337.10p -34.52%
AJ Bell (AJB) 262.20p -6.36%
IntegraFin Holding (IHP) 258.20p -5.07%
Marks & Spencer Group (MKS) 116.85p -4.22%
ITV (ITV) 62.00p -3.58%
Telecom Plus (TEP) 1,816.00p -3.20%
easyJet (EZJ) 355.30p -2.98%
CMC Markets (CMCX) 220.50p -2.86%
ASOS (ASC) 678.50p -2.86%
888 Holdings (DI) (888) 123.10p -2.84%