Taylor Wimpey Share News (TW.)

LONDON (Alliance News) - Stocks in London ended higher Wednesday, with housebuilders benefiting from plans announced by UK Chancellor George Osborne in his Autumn Statement, while Wall Street was digesting a blast of economic data ahead of the Thanksgiving Day holiday.

Osborne affirmed the UK government's deficit targets, though he walked back planned tax credit cuts and also stepped away from expected cuts to police spending.

Osborne, citing forecasts from the Office For Budget Responsibility, said the UK government will reach a surplus in 2019-20, in line with previous expectations, despite the Conservatives having ringfenced the NHS, defence and overseas aid from spending cuts. The OBR expects the UK will reach a budget surplus of 0.5% by 2019-20, and 0.6% the following year, compared to a deficit of 3.9% for this year.

The OBR expects economic growth in the UK to hit 2.4% in 2015, 2.4% in 2016, 2.5% in 2017 and 2.4% in 2018. The figures from 2016 onwards were revised higher by the OBR. The Chancellor said the UK still will be able to meet the surplus targets even while cutting less in the early years of the current government, which manifested itself in a decision to cancel planned reductions in tax credits.

The pound rose following Osborne's announcement, but it gave back its gains shortly afterwards. Sterling was at USD1.5101 at the London close, compared to USD1.5057 late Tuesday.

"Today's statement showed a government that is maintaining borrowing levels at a reasonable level coupled with the anticipation of strong long-term growth," said Shilen Shah, bond strategist at Investec Wealth & Investment. "However, fortunately for Osborne, this has been made possible by an economic environment of both low inflation and low interest rates."

UK's main indices, which already were higher, didn't show a big reaction to the Autumn Statement. The FTSE 100 index ended up 1.0% at 6,337.64 points, the FTSE 250 finished up 1.0% at 17,111.31, and the AIM All-Share closed up 0.3% at 730.23.

"The lack of concrete reaction in the market is a sign, perhaps, that most investors are quite happy with the maintenance of the UK economy and its recovery," said IG senior market analyst Chris Beauhamp.

Housebuilder stocks benefited as the chancellor committed the UK government to building 400,000 new affordable homes by the end of the decade, confirming earlier reports. The housing budget will be doubled to over GBP2.0 billion per year, meaning the government will help to build these homes.

Taylor Wimpey was the best blue-chip performer, up 3.8%. Persimmon ended up 3.2%, Barratt Developments up 2.9%, and Berkeley Group Holdings up 1.2%. In the FTSE 250, Bellway ended up 2.8% and Bovis Homes rose 2.6%.

However, some of the gains made by housebuilder stocks prior to Osborne standing up were pared back by his announcement a new 3.0% stamp duty levy on buy-to-let and second-home purchases.

The new levy weighed particularly on shares of FTSE 250 buy-to-let lenders, with OneSavings Bank ending down 7.3%, Aldermore Group down 5.4% and Paragon Group of Companies down 5.3%.

Osborne said the money raised from the new tax will be put towards funding for those struggling to buy their first home. He said his plan "addresses the fact that more and more homes are being bought as buy-to-lets or second homes". The extra stamp duty will aim to raise almost GBP1.0 billion by 2021, Osborne said.

Stocks related to security and defence also ended higher, with Rolls-Royce up 3.2%, BAE Systems up 1.2% and Ultra Electronics Holdings up 1.0%, as the UK government made no cuts to police budgets and ring-fenced defence spending.

Meanwhile, Shire ended down 2.4% after Reuters reported late Tuesday that the Irish drugmaker is preparing to make a new takeover offer for US peer Baxalta, citing a source with "direct knowledge of the situation". This comes almost four months after Baxalta rejected a previous unsolicited GBP20.0 billion offer Shire made, which it argued significantly undervalued the company.

Whitbread, owner of Costa Coffee and Premier Inn, closed up 3.0% after being initiated at Buy by HSBC, while miner Anglo American ended as the worst blue-chip performer, down 6.4% at 422.94 pence, after being downgraded to Reduce from Hold, also by HSBC. Goldman Sachs cut Anglo's price target to 430 pence from 450p.

Thomas Cook Group added 9.0% after it said current trading in its new financial year is encouraging, despite the sequence of terrorist attacks that have shaken the tourism industry over the last few months, as it made its first profit in five years in financial 2015.

Thomas Cook said demand for holidays to own-brand hotels and other new products increased, despite disruption to the business from the terrorist attack on a beach in Tunisia in which 38 holidaymakers died.

Outside the UK, Wall Street was higher at the London close, with the Dow Industrials up 0.2%, the S&P 500 index up 0.1% and the Nasdaq Composite up 0.3%, before the Thanksgiving Day holiday on Thursday and a half day for markets on Friday.

The US Department of Labor revealed Wednesday that initial jobless claims came in at 260,000 for the week ended November 21. This was down 12,000 from the revised level of 272,000 from the previous week. Economists had expected jobless claims to come in at 270,000.

The US Commerce Department showed that new orders for manufactured durable goods increased by much more than expected in the month of October. Durable goods orders jumped by 3.0% in October after falling by a revised 0.8% in September. Economists had expected orders to increase by 1.5%.

The Commerce Department also released a report showing that new home sales rebounded strongly in October after pulling back sharply in the previous month. The report said new home sales jumped 10.7% to an annual rate of 495,000 in October after slumping 12.9% to a revised 447,000 in September.

A third report from the Commerce Department showed that personal income rose in line with estimates in the month of October, and personal spending increased by less than expected.

The University of Michigan also released a report showing that consumer sentiment in November improved by less than previously estimated.

The report said the final reading on the consumer sentiment index for November came in at 91.3 compared to the preliminary reading of 93.1. Despite the downward revision, the consumer sentiment index was still modestly higher than the final October reading of 90.0.

In Europe, the CAC 40 index in Paris ended up 1.5% and the DAX 30 in Frankfurt closed up 2.2%. At the London close, the euro was at USD1.0611. Gold was quoted at 1,0.71.60 an ounce.

Crude oil prices declined slightly after data from the US Energy Information Administration showed that crude stockpiles in the US rose in the week ended November 20. The report said US crude oil inventories increased by 961,000 barrels last week, following a reading of 252,000 in the previous week.

At the London close, Brent oil price was at USD45.46 a barrel, while West Texas Intermediate was at USD42.38 a barrel.

In the economic calendar Thursday, the UK Financial Stability Report is due at 0930 GMT, while Germany's Gfk consumer confidence survey is expected at 1200 GMT.

In the UK corporate calendar, Severn Trent, LondonMetric Property, PayPoint and Charles Stanley Group release half-year results, while Marston's and SSP Group publishes full-year results. James Fisher & Sons, Stock Spirits Group and Anglo Pacific Group issue trading statements.

By Daniel Ruiz; danielruiz@alliancenews.com

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