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London close: Stocks mixed as government borrowing rises

Tue, 22nd Oct 2024 15:23

(Sharecast News) - London stocks saw a mixed performance on Tuesday, with investors digesting the latest data on government borrowing ahead of next week's Budget.

The FTSE 100 index slipped 0.14% to close at 8,306.54 points, while the FTSE 250 managed to edge up 0.21%, closing at 20,949.65 points.

In currency markets, sterling was last down 0.15% on the dollar to trade at $1.2965, while it was nearly flat against the euro, down just 0.01% to change hands at €1.2005.

"Earnings from General Motors have been insufficient to lift Wall Street, but the FTSE 100 has managed to recoup some of its losses thanks to an upgrade to the IMF's UK forecast," said IG chief market analyst Chris Beauchamp.

"The institution expects more cuts from the Bank of England, a view echoed by various banks that expect rate cuts to continue next year.

"It wasn't all good news for investors however, due to the prospect of more global tariffs hurting growth."

Beauchamp added that October's weakness in US stocks usually gets started around this time, especially in pre-election years.

"Hopes that a Trump presidency will prove beneficial for the US economy in some ways were offset by the knowledge that a Republican win will also mean more disagreements over trade with both allies and foes alike.

"At least US GDP growth, and thus consumer spending, remains robust."

UK government borrowing rises, but by less than expected

In economic news, the UK government's borrowing in September reached Â£16.6bn, marking the third-highest figure for the month since records began in 1993, according to the Office for National Statistics.

That represented a Â£2.1bn increase from the same period last year.

The borrowing figure exceeded the Office for Budget Responsibility's forecast of Â£15.1bn, though it fell below market expectations of Â£17.4bn.

Over the year to September, public sector borrowing rose to Â£79.6bn, a Â£1.2bn increase compared to the same point last year, continuing a trend of elevated borrowing.

"Overall, today's release means borrowing is on track to overshoot the OBR's 2024-2025 forecast of Â£87.2bn by Â£6.6bn," said Alex Kerr, UK economist at Capital Economics.

"This demonstrates the constraints on the Chancellor's ability to increase day-to-day spending in the Budget next week without raising taxes.

"Indeed, we expect her to increase current spending by a net Â£25bn a year and to fund that by raising taxes by Â£25bn."

On the political front, chancellor Rachel Reeves was reported to be considering tax reforms targeting large e-commerce companies like Amazon as part of her upcoming budget.

The potential changes would address criticisms that the current business rates system favours online retailers, which often benefit from lower property costs compared to high street stores.

Such reforms would be part of Labour's strategy to support the struggling high street, particularly in sectors like hospitality and leisure, where businesses are facing an impending increase in rates when Covid-era relief expires next April.

While business leaders had called for an extension of the relief, Reeves was apparently focussed on other measures to alleviate the financial pressure on physical stores, according to Bloomberg.

Long-term business tax reforms could generate up to Â£40bn to support public services, with the aim of balancing the tax burden between traditional retail and e-commerce.

Hunting slides, Morgan Sindall Group surges on fresh expectations

On London's equity markets, animal genetics firm Genus dropped 2.42% after it announced that chief financial officer Alison Henriksen would retire after five years with the company.

Mike Ashley's Frasers Group also fell, down 0.44%, following news that luxury handbag maker Mulberry rejected its second takeover offer, deeming it "untenable".

Energy services company Hunting took a significant hit, plummeting 16.98%after downgrading its full-year profit outlook.

Utilities also struggled, with Centrica, National Grid, and SSE posting losses of 1.26%, 1.32% and 0.99%, respectively.

Financial stocks were under pressure amid macroeconomic uncertainty, with Ninety One, Direct Line, Abrdn, Petershill Partners, and Baillie Gifford Japan Trust all seeing declines.

On the upside, precious metals miner Fresnillo rose 2.88%, benefiting from record-high gold prices.

Morgan Sindall Group surged 19.85% after it said its full-year results would significantly exceed previous expectations.

Luxury fashion brand Burberry climbed 2.78%, as sentiment in the luxury sector was boosted by Chinese government stimulus measures.

InterContinental Hotels Group reversed earlier losses, gaining 1.73%after reporting a 1.5% rise in third-quarter room revenue, driven by strong demand in the US and Europe.

Meanwhile, HSBC Holdings edged up 0.9% following the appointment of Pam Kaur as its new CFO and an announcement of structural changes to its business operations.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 8,306.54 -0.14%

FTSE 250 (MCX) 20,949.65 0.21%

techMARK (TASX) 4,762.45 -0.35%

FTSE 100 - Risers

Fresnillo (FRES) 769.00p 2.88%

Melrose Industries (MRO) 448.50p 2.00%

InterContinental Hotels Group (IHG) 8,714.00p 1.73%

British American Tobacco (BATS) 2,673.00p 1.60%

Entain (ENT) 717.20p 1.41%

Standard Chartered (STAN) 847.20p 1.27%