London close: Stocks finish higher after Hunt's Spring Budget

London's stock markets closed in positive territory on Wednesday, as investors absorbed the Chancellor's Spring Budget announcement of a 2p reduction in National Insurance.

Market attention was also focussed across the pond, on a speech from US Federal Reserve chair Jerome Powell to Congress.

The FTSE 100 rose 0.43%, reaching 7,679.31 points by the end of trading, while the FTSE 250 index saw gains of 1.05% to settle at 19,473.22 points.

In currency markets, sterling was last up 0.38% on the dollar, trading at $1.2753, while it declined 0.09% against the euro to change hands at €1.1693.

“Equities have dusted themselves down after yesterday’s sudden drop, relieved that Powell’s testimony to US lawmakers has so far not revealed any unpleasant surprises,” said IG chief market analyst Chris Beauchamp.

“‘Need more evidence’ is the Fed’s latest mantra, as it seeks to avoid cutting too early, but it seems stock markets are content with this.

“Should inflation start to pick up more sustainably, and Fed officials talk up rate hikes again, however, and the mood could shift dramatically.”

Beauchamp added that the Spring Budget was unlikely to cause many ructions in global markets, but the cautiously optimistic tone of Jeremy Hunt’s speech helped sterling edge higher.

“Growth forecasts were nudged higher, and while limited in his repertoire, the Chancellor did his best to put on a good show, handing out goodies where he could.”

Chancellor trims National Insurance, as expected

In what was likely his final Budget before the next general election, the Chancellor of the Exchequer unveiled measures aimed at stimulating the economy and reforming tax policies.

Addressing the House of Commons earlier, Jeremy Hunt announced a reduction in National Insurance and outlined plans to overhaul the tax regime for non-domiciled residents.

The reduction in National Insurance, building on a previous cut announced in the autumn statement, was expected to save the average employee an additional £450 per year.

Tax thresholds, however, remained unchanged.

One of the focal points of the Budget was the abolition of non-dom tax status, a policy also championed by the Labour Party.

Under the proposed reforms, individuals claiming non-domiciled resident status will no longer enjoy tax exemptions on overseas earnings for up to 15 years.

Instead, a new residency-based tax system will be implemented, aiming for simplicity and fairness.

The Chancellor projected that the changes would generate £2.7bn annually by the end of the forecast period.

Regarding the economic outlook, Hunt acknowledged the technical recession declared by the Office for National Statistics, emphasising freshly forecast growth rates.

The Office for Budget Responsibility predicted 0.8% GDP growth this year and 1.9% next year.

It anticipated inflation meanwhile falling below 2% in the coming months after reaching a peak of 11.1% in October 2022.

“The Chancellor announced net tax cuts of £12.bn in 2024-2025, falling to £5.2bn in 2028-2029, with few surprises in the details,” said Rob Wood, chief UK economist at Pantheon Macroeconomics.

“The underlying OBR fiscal forecasts barely changed at the crucial five-year forecast horizon, meaning Hunt used up some of his small remaining headroom to pay for tax cuts and covered the rest with a range of tax changes, such as the non-dom rules.

“Based on the Monetary Policy Committee’s interpretation of the autumn statement tax cuts, we think they will judge today’s measures will add around 0.1% to GDP growth over the next year but have little effect on the two-year ahead inflation forecast.”

Wood said the measures did not likely change the economic outlook or the MPC’s thinking.

“We still expect the first Bank Rate cut in June.”

UK construction sector improves, Powell reiterates likely rate cuts

In economic news, the UK's construction sector demonstrated signs of improvement, with the latest S&P Global UK construction purchasing managers' index showing a rebound in activity, particularly in housebuilding.

Similarly, eurozone construction activity saw a slight uptick in February, albeit remaining in contraction territory, with Germany and France experiencing notable declines.

Meanwhile, retail sales in the eurozone rebounded modestly in January following a decline in December, though annual figures indicate a continued decrease.

Shifting focus to the United States, the Department of Labor reported minimal changes in job openings at the beginning of the year, while hiring declined slightly.

Federal Reserve Chair Jerome Powell meanwhile reiterated his belief in the likelihood of lower interest rates in 2024 in his speech to Congress, although the timing remains uncertain pending progress towards the Fed's inflation target.

Powell emphasised the importance of carefully calibrating policy decisions to avoid detrimental impacts on economic activity and employment, underscoring the cautious stance of the central bank amid evolving economic conditions.

ConvaTec jumps on results, Legal & General in the red

On London’s equity markets, ConvaTec Group jumped 5.14% after it raised its forecasts for medium-term organic growth following a robust performance in 2023, characterised by margin expansion and double-digit profit growth.

British Airways and Iberia parent IAG ascended 4.79% after receiving a double upgrade to 'overweight' from JPMorgan.

Premier Foods rocketed 12.05% after it announced anticipated benefits from increased free cash flow in the upcoming financial year.

The agreement reached with the trustee of its pension scheme to suspend pension deficit contribution payments contributed to the positive outlook.

Breedon Group added 3.95% following its announcement of the acquisition of US-based BMC Enterprises for a significant enterprise value of $300m (£238.1m).

On the downside, Legal & General declined 0.86% after reporting lower-than-expected operating profits for the previous year amidst challenging market conditions.

Operating profit fell short of company-compiled forecasts, coming in at a flat £1.67bn compared to expectations of £1.75bn.

Lancashire Holdings and Ibstock registered declines of 0.22% and 4.95%, respectively, following their respective results announcements.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,681.33 0.46%
FTSE 250 (MCX) 19,473.22 1.05%
techMARK (TASX) 4,508.96 0.72%

FTSE 100 - Risers

Convatec Group (CTEC) 267.80p 6.10%
International Consolidated Airlines Group SA (CDI) (IAG) 148.65p 4.79%
Anglo American (AAL) 1,767.40p 3.73%
Weir Group (WEIR) 1,933.00p 2.82%
Smith & Nephew (SN.) 1,077.00p 2.72%
London Stock Exchange Group (LSEG) 9,252.00p 2.32%
Centrica (CNA) 130.45p 2.11%
Endeavour Mining (EDV) 1,454.00p 1.96%
Experian (EXPN) 3,412.00p 1.91%
Rentokil Initial (RTO) 428.50p 1.78%

FTSE 100 - Fallers

Hikma Pharmaceuticals (HIK) 1,841.00p -3.03%
Fresnillo (FRES) 479.30p -2.92%
Smurfit Kappa Group (CDI) (SKG) 3,254.00p -2.52%
Antofagasta (ANTO) 1,741.50p -2.03%
Reckitt Benckiser Group (RKT) 5,014.00p -1.96%
Pearson (PSON) 1,007.50p -1.71%
Diageo (DGE) 2,876.00p -1.61%
Standard Chartered (STAN) 677.60p -1.48%
Ocado Group (OCDO) 437.90p -1.44%
Informa (INF) 798.80p -1.07%

FTSE 250 - Risers

Premier Foods (PFD) 154.80p 11.53%
TUI AG Reg Shs (DI) (TUI) 568.50p 8.91%
Genus (GNS) 1,814.00p 7.59%
PureTech Health (PRTC) 198.00p 5.21%
Hipgnosis Songs Fund Limited NPV (SONG) 63.10p 4.64%
Jupiter Fund Management (JUP) 90.95p 4.60%
Hochschild Mining (HOC) 110.00p 4.36%
Breedon Group (BREE) 395.00p 3.95%
Johnson Matthey (JMAT) 1,650.50p 3.58%
Tritax Eurobox (GBP) (EBOX) 55.40p 3.17%

FTSE 250 - Fallers

Ibstock (IBST) 151.80p -4.95%
W.A.G Payment Solutions (WPS) 75.40p -3.33%
PPHE Hotel Group Ltd (PPH) 1,245.00p -3.11%
Me Group International (MEGP) 164.00p -1.80%
Grainger (GRI) 251.20p -1.34%
Tritax Big Box Reit (BBOX) 146.40p -1.28%
Mitie Group (MTO) 103.80p -1.14%
Spirent Communications (SPT) 175.00p -1.13%
IWG (IWG) 178.00p -1.11%
VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 464.50p -0.85%