London close: Stocks finish weaker as Chancellor's plan fails to excite
London stocks finished in the red on Wednesday amid worries about a rise in coronavirus cases in the US and Australia, and as investors digested Chancellor Rishi Sunak’s £30bn plan to boost the UK economy.
The FTSE 100 ended the session down 0.55% at 6,156.16, and the FTSE 250 was off 0.95% at 17,185.24.
Sterling was in a mixed state at the end of the day, last trading 0.3% stronger against the dollar at $1.2580, but weakening 0.1% on the euro to €1.1114.
Rishi Sunak announced a series of measures aimed at boosting the UK economy as it emerges from lockdown during the afternoon, including a six-month job retention bonus for furloughed workers and temporarily slashing VAT on food and accommodation.
Addressing the House of Commons, the Chancellor of the Exchequer announced a reduction in VAT on meals out, accommodation and attractions from 20% to 5%, for six months from next Wednesday.
In addition, a so-called ‘Eat Out to Help Out’ scheme was announced for August, where people dining out during the month from Monday to Wednesday could get 50% off, up to £10 per head, with companies able to register for the scheme from next Monday.
Other measures include a job retention bonus scheme, worth £1,000 per employee, for employers who bring back staff from furlough and keep them on until at least January 2021, potentially worth around £9bn.
There was also a £2bn ‘Kick Start’ scheme to create job placements for young people aged 16 to 24, as well as extra funding for apprenticeships.
Sunak also confirmed a widely-expected temporary stamp duty change that increases the threshold to £500,000 from £125,000, which would take effect immediately and last until March, with £2bn of grants to help make homes more energy efficient also confirmed.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, argued it was not enough to underpin a V-shaped recovery, however.
“In total, the fiscal package could lead to a cash injection of £30bn, or about 1.5% of annual GDP, though much will depend on how many firms bring back furloughed workers,” he said.
“The Chancellor hopes that economic activity will have rebounded sufficiently to ensure that employers bring back the vast majority of their furloughed workers, reducing the need for big fiscal support.
“Nonetheless, business surveys currently suggest that employment likely will be down about 4% year-over-year in the fourth quarter, hitting household incomes, while surveys of consumer confidences point to a sustained rise in their saving rate.”
Tombs said that, despite the Chancellor’s efforts, Pantheon was still expecting GDP to be about 5% below its pre-Covid level by the end of the year.
In equity markets, advertising giant WPP fell 5.25% after Credit Suisse reinstated coverage of the stock at ‘underperform’, pointing to "rising industry disruption".
"Our analysis of the marketing industry suggests that clients are shifting spend more rapidly to digital transformation at a time when agencies still have at least 70% of their revenues from traditional services," it said.
“Creative fee pressure, progressive in-housing of creative, production and media, competition in digital transformation from consultancies and new marketing technology firms remain the key challenges.”
Asia-focused bank HSBC was 2.91% weaker following a report the US could target Hong Kong’s currency peg with the dollar as a response to China’s new security law. Standard Chartered was also weaker.
"Should the peg disappear it could further destabilise Hong Kong and increase currency impacts on earnings," said London Capital Group analyst Jasper Lawler.
Bus and rail operator FirstGroup tumbled 23.06% as it pulled guidance and said it swung to a full-year loss as coronavirus lockdowns in the UK and US hit operations.
Sector peer National Express was also lower, falling 5.21%.
Victrex, a supplier of high-performance polymer solutions, lost 7.85% after it reported an 18% decline in third-quarter revenues and said Covid-related headwinds began to impact its performance in May and June after a broadly stable performance in April.
On the upside, Micro Focus was in the black by 2.99% after a rating upgrade at Credit Suisse.
FTSE 100 - Risers
Rolls-Royce Holdings (RR.) 287.80p 3.71%
Fresnillo (FRES) 908.60p 2.64%
Associated British Foods (ABF) 1,990.00p 2.33%
BHP Group (BHP) 1,682.20p 1.99%
M&G (MNG) 174.00p 1.75%
Anglo American (AAL) 1,865.60p 1.75%
Coca-Cola HBC AG (CDI) (CCH) 2,039.00p 1.65%
Rentokil Initial (RTO) 526.40p 1.58%
London Stock Exchange Group (LSE) 8,402.00p 1.38%
Reckitt Benckiser Group (RB.) 7,526.00p 1.18%
FTSE 100 - Fallers
WPP (WPP) 591.40p -5.35%
Melrose Industries (MRO) 114.10p -4.08%
International Consolidated Airlines Group SA (CDI) (IAG) 212.10p -3.85%
Ashtead Group (AHT) 2,670.00p -3.51%
Evraz (EVR) 291.90p -3.18%
HSBC Holdings (HSBA) 383.65p -2.91%
Johnson Matthey (JMAT) 2,094.00p -2.71%
Smith & Nephew (SN.) 1,536.00p -2.69%
3i Group (III) 821.40p -2.38%
Rightmove (RMV) 550.60p -2.20%
FTSE 250 - Risers
PureTech Health (PRTC) 288.00p 8.27%
Hochschild Mining (HOC) 191.30p 4.25%
Fidelity China Special Situations (FCSS) 309.00p 3.69%
IP Group (IPO) 63.60p 3.41%
Micro Focus International (MCRO) 363.90p 3.15%
AO World (AO.) 152.40p 2.97%
Spirent Communications (SPT) 255.50p 2.84%
Centamin (DI) (CEY) 188.15p 2.70%
Syncona Limited NPV (SYNC) 255.00p 2.59%
HGCapital Trust (HGT) 245.00p 2.27%
FTSE 250 - Fallers
FirstGroup (FGP) 37.84p -23.06%
Mitchells & Butlers (MAB) 156.00p -9.41%
Victrex plc (VCT) 1,830.00p -7.85%
Energean (ENOG) 507.00p -7.82%
easyJet (EZJ) 656.80p -6.57%
National Express Group (NEX) 167.30p -5.21%
Wizz Air Holdings (WIZZ) 3,210.00p -4.83%
Babcock International Group (BAB) 282.60p -4.75%
John Laing Group (JLG) 291.20p -4.71%
Signature Aviation (SIG) 234.30p -4.68%