London close: Stocks rally after Osborne unveils UK Budget 2016

The FTSE 100 closed higher on Wednesday as traders examined the UK Budget 2016 and UK jobs data.

Among the measures Chancellor George Osborne announced in his Budget included cutting corporation tax to 17% by 2020 from 20% and raising the individual tax free personal earnings allowance to £11,500.

Housebuilding stocks rallied, including Taylor Wimpey and Barratt Developments, after Osborne announced plans to lower stamp duty, and revealed savings held in the new lifetime ISA could be used towards a deposit on a mortgage.

Oil stocks, such as BP, Cairn Energy and Royal Dutch Shell, also benefitted from the government’s plans to abolish petroleum revenue tax.

Shares in pub operators Marston’s and JD Wetherspoon rose on plans to freeze duties on beer, cider, whisky and other spirits.

Osborne also said Britain is on course to achieve a surplus of £10.4bn by 2019-20. The Office for Budget Responsibility (OBR) expects debt to be 82.6% of gross domestic product (GDP) in 2016/17, followed by 81.3% in 2017/18.

The OBR also downgraded its forecast of UK economic growth in 2015 from 2.4% to 2.2%

It revised GDP downwards for this and following years - from 2.4% to 2% in 2016, from 2.5% to 2.2% in 2017, from 2.4% to 2.1% in 2018 and from 2.3% to 2.1% in both 2019 and 2020.

“From the FTSE’s perspective George Osborne’s 8th annual budget was, when everything is weighed up, a positive one, rising around 0.7% as the afternoon went on,” said Connor Campbell, financial analyst at Spreadex.

UK jobs

The unemployment rate in the UK was steady at 5.1% in January, in line with economists’ expectations, according to data from the Office for National Statistics.

Unemployment fell to 1.68m between November and January, which was 28,000 fewer than the previous quarter and down 171,000 from the same period a year earlier.

The ONS said there were 31.42m million in work, up 478,000 from a year ago.

Average weekly earnings rose 2.1% including bonuses between November and January compared with the same period a year earlier. Excluding bonuses, earnings were up 2.2%, also in line with expectations.

ONS statistician Nick Palme said: “Once again the latest quarterly figures show continuing high employment levels but no significant pick-up in earnings growth.”

The Bank of England is taking the health of the labour market into consideration as it determines the timing of an interest rate hike. The central bank meets on Thursday to announce its latest policy decision but is expected to keep interest rates unchanged.

The Federal Reserve is also expected to stand pat on rates when it announces its policy decision at 1800 GMT amid a slowdown in the global economy.

US inflation

The US consumer price index increased 1.0% in February from a year ago, beating forecasts for a 0.9% increase but down from January’s 1.4% year-on-year gain, Labor Department data showed. On the month, CPI fell 0.2% in February as expected, compared to 0% month-on-month in January.

Excluding volatile items including food and energy, CPI rose to 2.3% year-on-year in February from 2.2% in January, surprising analysts who had expected no change. Month-on-month core CPI held at 0.3%, more than the 0.2% that was forecast.

“In short, it is now blindingly obvious that inflation is trending higher, and we can have no faith that the upward trend will stop anytime soon,” according to Pantheon Macroeconomics.

“We think it very likely that the Fed's 2% target for core PCE inflation will now be reached in the fall of this year, some two years earlier than their December forecasts.”

Meanwhile, Fed data revealed US industrial production fell 0.5% in February, dragged lower by utilities and mining, compared with a 0.8% rise in January. Economists had been expecting a 0.3% decline.

US housing starts rose a little more than expected in February, the Commerce Department said. Housing starts were up 5.2% to an annual pace of 1.18m, surpassing economists’ expectations for an increase to 1.15m. January’s starts were revised up to 1.12m from 1.099m.

Oil prices rally

Oil prices rose after Qatari oil minister Mohammed Bin Saleh Al-Sada said that producers from and outside the Organization of the Petroleum Exporting Countries will meet on 17 April in Qatar to discuss a proposal to freeze output to address the supply glut.

The Energy Information Administration data also revealed an increase in crude stockpiles of 1.3 million barrels in the US last week, below the expected 3.4 million build.

Brent crude increased 3.6% to $40.20 per barrel and West Texas Intermediate jumped 4.1% to $37.91 per barrel at 1641 GMT.

Companies

Shares in wealth manager St James's Place surged after Osborne set out measures in the Budget to boost home ownership and retirement savings among Britons.

Tour operator TUI slumped after Citigroup downgraded its stock to 'sell' from 'neutral'.

Shares in Shire were also pressured downwards, as investors who had recently shunned Valeant Pharmaceuticals began to turn away from other makers of high-priced specialty drugs.

Hikma Pharmaceuticals, on the other hand, was a high riser reversing earlier declines after reporting a 3% drop in full year revenue and a 4% fall in core operating profit due to currency headwinds.

Tullow Oil gained as it said its Cheptuket-1 well in Northern Kenya has encountered good oil shows.

Market Movers

FTSE 100 (UKX) 6,177.44 0.61%
FTSE 250 (MCX) 16,751.13 0.70%
techMARK (TASX) 3,094.93 0.22%

FTSE 100 - Risers

Hikma Pharmaceuticals (HIK) 1,822.00p 5.87%
St James's Place (STJ) 934.50p 3.83%
Taylor Wimpey (TW.) 187.40p 3.31%
Royal Dutch Shell 'B' (RDSB) 1,711.00p 3.04%
Royal Dutch Shell 'A' (RDSA) 1,707.00p 2.99%
Barratt Developments (BDEV) 571.50p 2.97%
Legal & General Group (LGEN) 234.80p 2.94%
Berkeley Group Holdings (The) (BKG) 3,151.00p 2.64%
BP (BP.) 350.85p 2.59%
Glencore (GLEN) 144.30p 2.45%

FTSE 100 - Fallers

TUI AG Reg Shs (DI) (TUI) 989.50p -5.40%
Antofagasta (ANTO) 496.60p -3.29%
Shire Plc (SHP) 3,655.00p -2.97%
Smiths Group (SMIN) 1,050.00p -2.51%
Worldpay Group (WI) (WPG) 282.30p -2.45%
Standard Chartered (STAN) 456.55p -1.61%
Provident Financial (PFG) 2,946.00p -1.50%
Aberdeen Asset Management (ADN) 276.70p -1.46%
Randgold Resources Ltd. (RRS) 6,165.00p -1.36%
London Stock Exchange Group (LSE) 2,870.00p -1.24%

FTSE 250 - Risers

Tullow Oil (TLW) 206.80p 7.65%
Cairn Energy (CNE) 204.50p 6.79%
Allied Minds (ALM) 374.90p 6.20%
Ladbrokes (LAD) 121.70p 5.92%
Pets at Home Group (PETS) 284.60p 5.84%
Ted Baker (TED) 2,950.00p 4.80%
Crest Nicholson Holdings (CRST) 551.00p 4.06%
Ocado Group (OCDO) 281.10p 3.96%
William Hill (WMH) 379.60p 3.94%
NMC Health (NMC) 987.50p 3.78%

FTSE 250 - Fallers

Thomas Cook Group (TCG) 95.15p -6.35%
Moneysupermarket.com Group (MONY) 328.00p -4.54%
Evraz (EVR) 80.75p -4.49%
St. Modwen Properties (SMP) 314.20p -2.90%
P2P Global Investments C (P2P2) 914.50p -2.61%
Barr (A.G.) (BAG) 540.50p -2.44%
Restaurant Group (RTN) 383.70p -2.37%
CLS Holdings (CLI) 1,541.00p -2.22%
Homeserve (HSV) 419.40p -2.21%
Spire Healthcare Group (SPI) 337.00p -2.12%