London close: Stocks mixed as investors digest Hunt budget

London stocks were mixed but little changed by the close on Thursday, as investors digested the autumn statement from chancellor Jeremy Hunt.

The FTSE 100 ended the session down 0.06% at 7,346.54, while the FTSE 250 added 0.05% to 19,122.31.

Sterling was in the red, last trading down 0.69% on the dollar at $1.1832, while it weakened 0.24% against the euro to change hands at €1.1433.

“Today’s autumn statement was meant to set out a series of measures that would bring down the debt burden which was the one side benefit of the squeeze needed to drive down inflation,” said IG senior market analyst Joshua Mahony.

“However, despite introducing a host of tax measures that will further tighten the purse strings for many, Rishi Sunak ultimately opted to counteract that with a series of spending pledges that will ultimately drive UK debt upward over the near-term.”

Mahony said the decision to avoid waging war on the economy would hopefully lessen the depth of the recession, although it could ultimately last longer as elevated inflation drove real household income lower.

“The prospect of real disposable income heading lower for two years does highlight the difficulties for UK businesses, with the FTSE 250 continuing to come under pressure after yesterday’s CPI-driven decline.”

On the budget front, Jeremy Hunt unleashed a £55bn package of tax rises and spending cuts as he sought to place the ruling Conservative Party in a position to win the next general election in two years.

Seeking to reassure febrile and fickle bond traders that the mercifully-short Tory policy of chasing growth through unfunded tax cuts - as espoused during the disastrous 45-day reign of Liz Truss - was now over, Hunt attempted to portray his measures as an equal distribution of fiscal pain.

Millions would be pulled into paying more tax using “fiscal drag”, whereby tax thresholds were frozen or lowered.

In this case, higher earners would now start paying the 45% tax rate at £125,400 instead of £150,000.

At the other end, those entitled to the £12,570 tax-free allowance would see its current level now frozen until 2028 - two years longer than planned.

In terms of public spending, with the exception of health and education, government departments would now have their budgets cut in real terms.

However, the real fallout from Hunt’s “fiscal bomb” was not timed to go off until after 2024, when either the Conservatives would have been able to give away tax cuts ahead of the election to help them win another term, or they lose at the ballot box and the opposition Labour Party would find itself left with the wreckage.

The Office for Budget Responsibility also confirmed the UK had fallen into a recession set to last more than a year, pushing half a million people into the dole queue.

As a result, Britons were set to see living standards fall by 7% to their lowest levels since records began - wiping out eight years of growth in the process, with wages falling well behind surging inflation and interest rates.

In stark terms, real disposable incomes would be at 2013 levels, the OBR said.

It also said government debt in five years was expected to be an eye-wateringly £400bn, or 18% of GDP - higher than forecast in the March budget, and partially caused by Truss’ cataclysmic plan to hand out £45bn in unfunded tax cuts to the wealthy, sparking a rise in interest rates and market turmoil.

The economy was forecast to contract by 2%, with unemployment up 505,000 in the second half of 2024, the OBR said.

GDP would only reach its pre-pandemic level by the end of the same year.

Elsewhere, there were attacks on those who garner extra income from share dividends, with the tax free allowance halved to £1,000 from next April and again to £500 a year later, rendering the benefit practically worthless, but sparing Hunt criticism had he axed it altogether.

Capital gains allowances also got the sharp knife treatment, more than halved to £6,000 in 2024 and £3,000 the year after.

The Treasury estimated the two measures combined would raise more than £1.2bn a year from April 2025.

Hunt said he hoped to raise £14bn next year after increasing the windfall tax on oil and gas companies and also hitting profits of low carbon electricity generators - including those producing from wind, solar and nuclear.

The existing windfall tax on North Sea oil and gas operators, the energy profits levy (EPL), would be raised to 35% from 25% and extended by two years, until March 2028.

In economic news from the continent, eurozone inflation was a touch lower than initially estimated in October but still at a record high amid surging energy prices, according to figures from Eurostat.

The annual inflation rate was 10.6%, up from 9.9% in September, but 0.1 percentage point lower than initially estimated.

Energy inflation rose to 41.5% in October from 40.7% in September. This was slightly below the initial estimate of 41.9%.

Meanwhile, food, alcohol and tobacco inflation increased to 13.1% from 11.8%.

Across the pond, unemployment claims in the US slipped slightly last week, with the Department of Labor reporting first time jobless claims decreasing by 4,000 to reach 222,000, compared to Barclays’ forecast for 230,000.

The four-week moving average for initial claims meanwhile increased by 2,000 to 221,000.

Elsewhere, housebuilders in the US broke ground on slightly more new houses than forecast by economists last month.

The Department of Commerce said the annual rate of housing starts declined at a seasonally-adjusted month-on-month pace of 4.2% to reach 1.425 million, just above expectations for 1.42 million.

Meanwhile, the prior month's pace was revised up to 1.488 million from 1.439 million.

On London’s equity markets, Ocado Group slid 9.72% after hedge fund Kintbury Capital said it was expecting 50% downside in the shares at best.

Safety equipment firm Halma fell 4.34% despite reporting record half-year revenue and profit.

Spirax-Sarco Engineering lost 3.02% even after it reiterated guidance for full-year operating profits and reported continued strong demand despite a weakening outlook for global industrial production.

Hargreaves Lansdown and Rathbones were knocked down a respective 4.8% and 0.5%, after rating downgrades from RBC Capital Markets.

East Mediterranean-focused oil and gas producer Energean was 4.04% lower despite lifting annual production guidance as its Israel Karish gas field came onstream.

AJ Bell lost 3.89% after the chancellor took the secateurs to the tax-free allowance on dividend earnings.

On the upside, Burberry Group rallied 2% after the luxury fashion brand posted a jump in first-half and set new medium-term guidance for sales.

In the 26 weeks to 1 October, adjusted operating profit rose 6% at constant exchange rates to £238m, while revenues grew 5% to £1.35bn.

Power generator Drax Group reversed earlier losses to close up 5.44%, even after Jeremy Hunt announced the introduction of a temporary 45% levy on electricity generators.

British Gas owner Centrica also reversed its fortunes, ending the day up 5.43%.

Lloyds Banking Group rose 2.99%, Barclays added 1.46% and NatWest was 2.47% higher after Hunt confirmed the slashing of the surcharge on bank profits over £100m.

Mitie Group jumped 4.44% after the outsourcer bumped up its full-year operating profit guidance as it posted a rise in interim revenues but a drop in profit amid fewer Covid-related contracts.

Reporting by Josh White for Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti and Alexander Bueso.

Market Movers

FTSE 100 (UKX) 7,346.54 -0.06%
FTSE 250 (MCX) 19,122.31 0.05%
techMARK (TASX) 4,335.48 -0.15%

FTSE 100 - Risers

Centrica (CNA) 91.70p 5.43%
Lloyds Banking Group (LLOY) 44.42p 2.99%
Imperial Brands (IMB) 2,109.00p 2.73%
NATWEST GROUP (NWG) 253.00p 2.47%
Legal & General Group (LGEN) 253.60p 2.26%
Burberry Group (BRBY) 2,043.00p 2.00%
British Land Company (BLND) 399.50p 1.99%
3i Group (III) 1,282.50p 1.99%
M&G (MNG) 193.60p 1.98%
Standard Chartered (STAN) 584.80p 1.95%

FTSE 100 - Fallers

Ocado Group (OCDO) 663.40p -8.62%
Harbour Energy (HBR) 314.00p -5.90%
Hargreaves Lansdown (HL.) 829.40p -4.80%
Halma (HLMA) 2,247.00p -4.34%
Antofagasta (ANTO) 1,322.00p -3.15%
Anglo American (AAL) 3,142.00p -3.05%
Spirax-Sarco Engineering (SPX) 11,250.00p -3.02%
Smurfit Kappa Group (CDI) (SKG) 3,010.00p -2.65%
DCC (CDI) (DCC) 4,329.00p -2.59%
Endeavour Mining (EDV) 1,611.00p -2.25%

FTSE 250 - Risers

Drax Group (DRX) 601.00p 5.44%
Vietnam Enterprise Investments (DI) (VEIL) 535.00p 5.11%
Kainos Group (KNOS) 1,578.00p 4.50%
Mitie Group (MTO) 77.60p 4.44%
Beazley (BEZ) 627.00p 3.72%
Greencoat UK Wind (UKW) 151.50p 3.20%
Bank of Georgia Group (BGEO) 2,450.00p 3.16%
Shaftesbury (SHB) 388.20p 3.06%
Syncona Limited NPV (SYNC) 178.00p 3.01%
Balfour Beatty (BBY) 308.20p 3.01%

FTSE 250 - Fallers

W.A.G Payment Solutions (WPS) 69.00p -10.86%
IP Group (IPO) 65.35p -4.25%
Energean (ENOG) 1,424.00p -4.04%
AJ Bell (AJB) 341.00p -3.89%
Bridgepoint Group (Reg S) (BPT) 206.40p -3.65%
Petrofac Ltd. (PFC) 120.60p -3.46%
National Express Group (NEX) 168.80p -3.10%
Balanced Commercial Property Trust Limited (BCPT) 84.80p -3.09%
Chemring Group (CHG) 293.50p -2.98%
Crest Nicholson Holdings (CRST) 214.80p -2.89%