London close: Stocks strengthen on Hunt's mini-budget bonfire

London stocks finished in the green on Monday, while the pound rose and gilt yields fell after new chancellor Jeremy Hunt put the final nail in the coffin of his predecessor’s so-called mini-budget.

The FTSE 100 ended the session up 0.9% at 6,920.24, and the FTSE 250 was ahead 2.76% at 17,502.84.

Sterling was well above the waterline as well, last trading up 2.09% on the dollar at $1.1405, and strengthening 0.79% against the euro to change hands at €1.1590.

“Sharp declines in UK gilt yields have provided a solid uplift to the FTSE 100 led by utilities and housebuilders, as the UK blue-chip index looks to reverse the declines of the last few days,” said CMC Markets chief market analyst Michael Hewson.

“Falling gilt yields and the fact that the stamp duty measures survived the budget cull, have provided a solid boost to house builders Barratt Developments, Persimmon and Taylor Wimpey, along with a lift from the stamp duty measures which survived intact.

“While mortgage rates are now likely to fall back modestly because of today’s measures, lower rates of mortgage availability may well temper the rebound as the week progresses.”

Indeed, new finance minister Jeremy Hunt put the last elements of Prime Minister Liz Truss’s economic plan into the Westminster shredder throughout the day, confirming there would be no tax cuts at all, while the government’s energy price guarantee would end in the spring.

In statements on television and later to parliament to reassure markets that the disastrous mini-budget of his predecessor Kawsi Kwarteng was now consigned to the bin, Hunt said the plan to cut the basic rate of income tax to 19p would be scrapped along with other measures.

Truss drew further ridicule when she failed to appear in the House of Commons to answer an urgent question from Labour on Kwarteng's sacking.

Citing "urgent" business, she sent Commons leader Penny Mordaunt in her place.

Mordaunt then fell into a trap set by Labour's Stella Creasy, being forced to tell the chamber that Truss wasn't "hiding under a desk" in response to suggestions the prime minister was cowering.

The last round of u-turns were the final humiliation of Truss and her ideological belief that tax cuts would spark growth and lift Britain from the economic doldrums.

She was now staring down an uncertain future with no effective authority, after the dismantling of her key economic policy.

Overall, the removal of most of the mini-budget measures would raise the Treasury £32bn a year by 2026-2027, Hunt said, although in truth the money would have been coming in anyway before the ill-fated mini-budget co-authored by Truss and Kwarteng.

However, it was the decision to truncate Truss’s multi-billion big-ticket plan to shield consumers from soaring energy prices - ironically the one measure that had widespread electoral support - that raised eyebrows.

Instead, there would be a review of the plan next April.

"This is a landmark policy supporting millions of people through a difficult winter and today I want to confirm that the support we are providing between now and April next year will not change," he said.

"But beyond that, the prime minister and I have agreed it would not be responsible to continue exposing public finances to unlimited volatility in international gas prices.

“So I’m announcing today a Treasury-led review into how we support energy bills beyond April next year.”

He said the plan would be to "design a new approach that will cost the taxpayer significantly less than planned whilst ensuring enough support for those in need", with any support for businesses targeted to those most affected.

Hunt also warned again of spending cuts and possible tax rises "as we deliver our commitment to get debt falling as a share of the economy over the medium term".

"All departments will need to redouble their efforts to find savings and some areas of spending will need to be cut," he said.

Other measures to fall under the knife included cuts to dividend tax rates, a relaxation of tax rules for self-employed people, VAT-free shopping for tourists and alcohol duty changes.

In economic news, house buyer demand softened over the last fortnight according to a closely-watched survey of the UK market, as the spike in mortgage rates weighed heavily.

According to the latest Rightmove house price index, buyer demand remains 20% higher than 2019, but fell 15% year-on-year over the last two weeks.

Demand from first-time buyers was down 21% in the same fortnight.

The property portal attributed the weakening to recent "rapid" mortgage rate rises, which had caused potential buyers to pause their plans.

House prices continued to grow, rising 0.9% to a fresh high of £371,158, although that was below the five-year average rise for October of 1.2%.

The number of homes seeing a reduction in asking price during the month rose to 3% from 2%.

“What’s going to happen to house prices is understandably on the minds of many home-movers right now, especially following the market uncertainty after the government’s mini-budget,” said Tim Bannister, director of property science at Rightmove.

“There has been no immediate effect on prices, but the trend of a slight softening in the pace of growth continues.

“Some aspiring first-time buyers will have had their plans dashed by the sudden nature of the mortgage rate rise, and now face a difficult situation with rents also rising and a shortage of available homes to rent.”

Elsewhere, footfall across UK retail destinations ticked higher last week, but consumers were acting increasingly cautious, according to retail expert Springboard.

Footfall across destinations rose 0.8% from the week before, with footfall on high streets up 1.6%, mainly thanks to a bounce-back of 10% on Wednesday following a weak comparable due to rain.

Excluding Wednesday, footfall last week was flat on the prior week.

Footfall in city centres rose 3.3%, while central London saw a 4.4% jump, suggesting an increase in office versus home working last week.

Footfall at retail parks dipped 0.4%.

Springboard said all signs point to an increased level of cautiousness amongst consumers.

While there were marginal rises in footfall during weekdays, on Saturday footfall declined across all three key destination types.

Diane Wehrle, insights director at Springboard, said the fact that footfall excluding Wednesday was flat is "a strong indicator of the cautiousness of consumers in the light of the current economic challenges".

"This cautiousness is particularly apparent in a drop in footfall across all three key destination types on Saturday, the peak trading day of the week,” she said.

“Whilst consumers are clearly being cautious, the signs pointed to employees gravitating into their offices last week.

"Footfall in larger cities across the UK rose by twice the high street average, with an even greater uplift in central London whilst in market towns and Greater London - which have become strong indicators of the extent of home working - footfall was weaker.”

Across the pond, manufacturing activity in the New York area contracted in October for the third month in a row, according to a survey released earlier.

The New York Fed’s Empire State general business conditions index fell eight points from September to -9.1.

According to the survey, 23% of respondents reported that conditions had improved over the month, while 32% said they had worsened.

On London’s equity markets, Standard Chartered was ahead 2.55% after an upgrade to ‘overweight’ at Morgan Stanley.

ITV surged 9.14% following a report that bosses at the broadcaster were seeking to cast its production business in a more prominent light, amid frustrations with the group’s stock market valuation.

According to the Times, the company was reviewing the future of ITV Studios - its production arm - including the option of selling a stake, in an attempt to boost its lagging share price.

Housebuilders were also in the green after the stamp duty cut announced by former chancellor Kwarteng last month was one of the few changes not to be scrapped by Hunt, while falling gilt yields also lent support.

Persimmon was up 4.38%, Taylor Wimpey added 3.77%, and Barratt Developments rallied 3.75%.

United Utilities Group and Severn Trent also advanced by a respective 4.38% and 4.05% after Hunt’s shortening of the energy price guarantee.

On the downside, Hargreaves Lansdown slumped 1.94% after it reported a drop in first-quarter assets under administration and announced the departure of chief executive Chris Hill, amid reports the company had been hit by a lawsuit over the failure of Neil Woodford's equity income fund.

Asos lost 2.54% after the online retailer confirmed it was in the final stages of agreeing an amendment to its revolving credit facility, following reports that a leading credit insurer cut cover for its suppliers.

Allianz Trade reduced its insurance cover for Asos suppliers by more than half, media claimed over the weekend, which could force the fast fashion giant to pay for products up-front, tightening the squeeze on its cash flow.

Reporting by Josh White at Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti and Abigail Townsend.

Market Movers

FTSE 100 (UKX) 6,920.24 0.90%
FTSE 250 (MCX) 17,502.84 2.76%
techMARK (TASX) 4,133.69 1.27%

FTSE 100 - Risers

British Land Company (BLND) 350.60p 5.19%
Persimmon (PSN) 1,269.50p 4.83%
Land Securities Group (LAND) 531.20p 4.77%
International Consolidated Airlines Group SA (CDI) (IAG) 115.04p 4.72%
United Utilities Group (UU.) 891.80p 4.38%
Intermediate Capital Group (ICP) 1,022.50p 4.21%
Severn Trent (SVT) 2,396.00p 4.05%
National Grid (NG.) 906.00p 3.99%
Taylor Wimpey (TW.) 91.28p 3.77%
Barratt Developments (BDEV) 360.00p 3.75%

FTSE 100 - Fallers

Hargreaves Lansdown (HL.) 796.60p -1.94%
Haleon (HLN) 269.10p -1.72%
BP (BP.) 449.45p -1.23%
Pearson (PSON) 889.60p -1.16%
Coca-Cola HBC AG (CDI) (CCH) 1,981.00p -0.83%
Halma (HLMA) 2,021.00p -0.73%
Unilever (ULVR) 3,858.50p -0.61%
Imperial Brands (IMB) 2,007.00p -0.45%
F&C Investment Trust (FCIT) 871.00p -0.34%
Aveva Group (AVV) 3,150.00p -0.16%

FTSE 250 - Risers

Darktrace (DARK) 343.40p 13.18%
ITV (ITV) 67.34p 9.14%
Urban Logistics Reit (SHED) 131.50p 6.91%
Ascential (ASCL) 194.60p 6.86%
Future (FUTR) 1,305.00p 6.79%
W.A.G Payment Solutions (WPS) 84.80p 6.68%
Shaftesbury (SHB) 351.40p 6.68%
Morgan Advanced Materials (MGAM) 256.50p 6.65%
Vistry Group (VTY) 565.50p 6.60%
Liontrust Asset Management (LIO) 812.00p 6.54%

FTSE 250 - Fallers

ASOS (ASC) 518.00p -2.54%
Hikma Pharmaceuticals (HIK) 1,242.00p -1.62%
Baillie Gifford Japan Trust (BGFD) 703.00p -1.26%
JPMorgan Japanese Inv Trust (JFJ) 420.00p -0.83%
Tullow Oil (TLW) 37.66p -0.74%
Jlen Environmental Assets Group Limited NPV (JLEN) 113.20p -0.70%
Indivior (INDV) 1,516.00p -0.52%
Worldwide Healthcare Trust (WWH) 3,230.00p -0.46%
VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 448.50p -0.33%
JPMorgan Indian Investment Trust (JII) 808.00p -0.25%