London close: Investors cheer tax cuts, reports of China stimulus
London-listed stocks found a bid at the start of the week, buoyed by a solid set of earnings from HSBC, the unveiling of tax cuts for 2019 and reports of potential further economic stimulus in the pipeline in China, although traders remained of a cautious bent.
The FTSE 100 gained 1.25% or 86.76 points to 7,026.32, while the pound was 0.24% weaker against the dollar at 1.27956 and down by 0.22% against the euro to 1.1246.
In parallel, the second-tier index put on 1.17% or 213.92 points to finish at 18,566.82, as the Chancellor claimed in his Autumn budget statement that the 'era of austerity' was coming to a close.
"Austerity is coming to an end, but discipline will remain," Hammond claimed, as he brought forward tax cuts by one year to next April, including an increase in the personal tax allowance and in the higher rate threshhold, among other measures.
However, he conceded his plans could be undermined should Britain finally end up 'crashing out' of the European Union. As well, over the weekend some observers had pointed out the serious demographic challenges the UK was facing, especially if Britons wished to maintain the current level of public services.
Nevertheless, commenting on the Chancellor's proposals, some analysts were dismissive, with Neil Wilson, chief market analyst at Markets.com, saying: "On the Budget itself, we got a confident, jocular chancellor and a fair bit of extra cash being splashed around for various departments – defence, potholes, schools etc. Nothing earth-shatteringly major however.
"This was a political Budget aimed at tackling the Corbyn threat – end of PFI and a kind of pseudo Google tax. And the elephant in the room was Brexit – it could all change if there is no deal, the odds of which are shortening by the day."
Linked to the above, the Office for Budget Responsibility had marked-up its projections for the rate of growth in gross domestic product in the UK for 2019 and 2020, versus its Spring forecasts, from 1.3% to 1.6% and from 1.3% to 1.4%, respectively, although that for 2018 was trimmed from 1.5% to 1.3% - the slowest since 2009.
Ahead of the Budget, data from the bank of England showed that the amount of unsecured lending in the UK fell sharply in September as British consumers opted against buying new cars.
New consumer borrowing excluding mortgages was £0.8bn in September, down from £1.2bn in August. The growth rate in unsecured lending was 7.7%, down from August’s rate of 8.2% and the slowest growth since August 2015.
In the three months to September, on an annualised basis growth was ahead 5.5%, the weakest since January 2014. The Bank attributed the decline to weaker net borrowing for other loans and advances, which fell from £0.7bn to £0.3bn.
The Bank also said that mortgage lending improved in September, up to £3.9bn after "two relatively weak months".
The annual growth rate of mortgage lending was unchanged at 3.2%. The rate has now been around 3% since late 2016. Meanwhile, the number of mortgages approved for house purchase was broadly unchanged at 65,000.
On the company front, Melrose Industries - due to its GKN business - was sitting pretty near the top of the FTSE 100 leader board following a Bloomberg report that China's regulator is considering cutting tax for most cars in half to boost flagging sales in its automotive market.
On that note, last Friday analysts at Bank of America-Merrill Lynch had told clients: "So far, the combination of trade wars and bad news out of China has caused us to trim only a couple tenths off regional and global growth.
"We expect the Chinese government to continue to roll out stimulus measures that match the weakness in the economy. This should help ensure a soft landing next year. However, the trade war still has a ways to go and it is much too early to judge the efficacy of the stimulus measures. Stay tuned."
Johnson Matthey, which supplies catalytic converters, and TI Fluid Systems, which makes brake fluid and fuel lines, also racked up solid gains on the back of the report.
HSBC meanwhile rallied as it reported stronger profit growth than expected for the third quarter as all three of the bank's main businesses enjoyed good growth and progress was made with cost cutting efforts. Profit before tax for quarter of $5.9bn was 28% higher than the same quarter last year, with adjusted PBT up 16% to $6.2bn. Shares of fellow Asia-focused bank Standard Chartered was also given a boost.
Miner Rio Tinto advanced on the back of the lapsing of a non-binding 2016 agreement for Chinalco to acquire the company’s stake in the Simandou iron ore project in Guinea. Rio holds 45.05% of the project, with Chinalco (39.95%) and the Guinea government 15%.
IWG was in the green following a report that the serviced offices provider has held talks with Guy Hands - the owner of private equity firm Terra Firma - about a potential spin-off its Spaces co-working brand.
Transport operator Firstgroup advanced following a weekend press report that some of its shareholders are pushing for a breakup of the company.
Metro Bank surged as Citi recommended buying the challenger bank after the selloff, saying growth was "still excellent".
On the downside, Just Eat retreated as Peel Hunt cut its stance on the stock to 'sell' from 'buy', pointing to recent reports of a tie-up between Uber and Deliveroo.
Market Movers
FTSE 100 (UKX) 7,026.32 1.25%
FTSE 250 (MCX) 18,566.82 1.17%
techMARK (TASX) 3,262.09 1.55%
FTSE 100 - Risers
GVC Holdings (GVC) 922.00p 6.53%
Melrose Industries (MRO) 161.65p 4.97%
HSBC Holdings (HSBA) 633.80p 4.76%
Evraz (EVR) 525.40p 4.45%
BT Group (BT.A) 238.25p 3.77%
Standard Life Aberdeen (SLA) 266.25p 3.60%
Ferguson (FERG) 5,170.00p 3.60%
Royal Mail (RMG) 360.90p 3.50%
Smith (DS) (SMDS) 378.20p 3.33%
United Utilities Group (UU.) 733.80p 3.26%
FTSE 100 - Fallers
Rolls-Royce Holdings (RR.) 831.40p -2.76%
British American Tobacco (BATS) 3,558.00p -1.93%
Randgold Resources Ltd. (RRS) 6,300.00p -1.81%
BAE Systems (BA.) 522.40p -1.80%
Fresnillo (FRES) 895.20p -1.60%
Just Eat (JE.) 594.40p -1.23%
Carnival (CCL) 4,160.00p -1.05%
Reckitt Benckiser Group (RB.) 6,611.00p -0.88%
Micro Focus International (MCRO) 1,190.00p -0.71%
Diageo (DGE) 2,677.00p -0.67%
FTSE 250 - Risers
Superdry (SDRY) 762.00p 7.32%
Inchcape (INCH) 526.00p 5.41%
Capita (CPI) 126.50p 5.20%
Convatec Group (CTEC) 154.30p 5.17%
Weir Group (WEIR) 1,521.50p 5.15%
Energean Oil & Gas (ENOG) 620.00p 5.08%
Softcat (SCT) 700.00p 4.95%
Hill & Smith Holdings (HILS) 1,000.00p 4.77%
Bank of Georgia Group (BGEO) 1,550.60p 4.35%
Countryside Properties (CSP) 282.80p 4.28%
FTSE 250 - Fallers
BBA Aviation (BBA) 232.20p -4.37%
Plus500 Ltd (DI) (PLUS) 1,317.00p -3.94%
Ibstock (IBST) 213.80p -2.64%
Rank Group (RNK) 154.20p -2.45%
Clarkson (CKN) 2,430.00p -2.43%
Fisher (James) & Sons (FSJ) 1,604.00p -1.72%
Saga (SAGA) 119.20p -1.32%
Hilton Food Group (HFG) 902.00p -1.31%
Tullow Oil (TLW) 217.30p -1.27%
Mitchells & Butlers (MAB) 256.60p -1.23%