FTSE 100 hits 3-month closing low after new economic plan scared investors

London Stock Exchange Group offices in the City of London, Britain, December 29, 2017. REUTERS/Toby Melville/File Photo

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  • The rally in housing-builders stocks is fading
  • UK deflation deepens – PMI flashes
  • Burberry slips as the CFO plans to step down
  • FTSE 100 down 2.0%, FTSE 250 off 2.0%

(Reuters) – Britain’s FTSE 100 index hit a three-month closing low on Friday after new British finance minister Kwasi Quarting unveiled historic tax cuts and spending plans to boost the economy, but it hurt market sentiment as investors grew concerned about a massive increase in borrowing. .

Kwarteng has announced an economic agenda designed to pull Britain out of the doldrums and usher in a new era of higher economic growth – but with a huge bill attached. Read more

The international focus FTSE 100 (.FTSE) index closed 2.0% lower at its lowest level since June 17. The index fell 2.5%, hitting a six-month low earlier in the session.

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The locally focused FTSE 250 (.FTMC) Index was down 2.0%, nearing a two-year low.

The plan included eliminating the country’s highest income tax rate and increasing the corporate tax rate. Quarting said Britain would spend about 60 billion pounds ($67 billion) to support gas and electricity bills for the next six months for homes and businesses. Read more

“Inflation headwinds continue, and with this tax cut likely only to add to inflationary fears, it makes the BoE’s job to cool rising costs more difficult,” said Charles Hepworth, investment director at GAM Investments.

“The good news is that the bank at least retains its independence for now.”

Shares of UK homebuilders (.FTNMX402020) fell 1.3% after getting a brief boost from government plans to cut stamp duties to help families afford home purchases. It is among the worst performing sectors in the UK this year as higher interest rates raised concerns about affordability. Read more

A survey showed that the downturn in British businesses intensified this month as they battled high costs and faltering demand, exacerbating the risks of a recession. Read more

“We are very cautious about cyclical stocks. We need to see the PMI hitting lows rather than the downward path we are in at the moment,” said Roger Jones, head of equities at London & Capital.

Data earlier showed that British consumer confidence fell this month to its lowest level since records began in the mid-1970s. Read more

Oil (.FTNMX601010) and mining (.FTNMX551020) were the biggest factors influencing the FTSE 100 as commodity prices fell against the strong dollar.

Among single stocks, Burberry (BRBY.L) fell 4.6% after the luxury group said chief financial officer Julie Brown was planning to step down in April. Read more

Smiths Group (SMIN.L) rose 1.3% after the industrial technology group gave an optimistic outlook for the whole of 2023.

Made.com (MADE.L) fell 20.0% after the online furniture retailer said it would cut jobs and consider options including selling as it struggles with a sharp drop in consumer spending and supply chain hurdles. Read more

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Additional reporting by Sruthi Shankar in Bengaluru; Editing by Anil de Silva, Jonathan Otis and Shalish Cooper

Our Standards: Thomson Reuters Trust Principles.

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