UK MIDDAY BRIEFING: Budget Aftershocks Reverberate Through Shares

LONDON (Alliance News) - UK equities are attempting to rebalance today in the wake of the tax and regulatory changes unveiled in Wednesday's government budget.

Life insurance companies have continued to take a battering during morning trading, following the announcement by Chancellor of the Exchequer George Osborne of a surprise shake up of the UK pension market, saying retirees no longer need to buy annuities with their pension pots.

While individuals will still be able to take out annuities - a form of life insurance that pays out a guaranteed lifetime income - they also will be able to take their pension savings in a lump sum or draw them down over time.

After dropping by more than 50% on Wednesday, Partnership Assurance continues to lead the FTSE 250 lower, down a further 10%. Fellow annuity provider Resolution Limited is amongst the FTSE 100 fallers, down 6.9%. Insurer Legal & General is performing slightly better, up 0.8% Thursday, rebounding from the 8.4% fall suffered on Wednesday.

Amid a wave of company responses released since the Chancellor took his seat, Resolution, which offers annuities through its Friends Life brand, admitted that Osborne's move holds "a negative implication for new business flows in the individual annuity market", but said the changes will have no affect on its market-consistent embedded value of GBP6.07 billion at the end of 2013.

FTSE 100-listed betting firm William Hill, was quick to react to the UK government's decision to increase the tax rate on high-speed, high-stake gambling machines to 25% next year, initially estimating the additional cost to its business at GBP16 million. However the firm Thursday revised its estimate higher, to an expected cost of GBP22 million, saying that the initial knee-jerk figure came while there was confusion over exactly which gaming terminals will be affected by the increased tax rate, and the levy covers more than first thought.

Rival Ladbrokes also took a hit in the wake of the announcement. Both shares trade firmly down.

Rank Group rode the Chancellor's measure to halve bingo duty with perfect timing: the firm said Wednesday it plans to open three new bingo clubs.

The extension of the Help to Buy scheme has been welcomed by housebuilder Crest Nicholson. Osborne has extended one part of the housing directive to 2020, which will provide more certainty for business planning in the medium-term, supporting investment in the skills and capacity required to deliver more new homes, said the company. The firm reported a boost in its reservation rates, selling prices and forward sales during its financial year, as it continued to benefit from the recovery in the UK housing market and the government's housing support scheme.

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FTSE 100: Down 1.0% at 6,506.45
FTSE 250: Down 1.0% at 16,3177.10
AIM ALL-SHARE: Down 1.0% at 860.40
GBP-USD: Down at 1.6493
EUR-USD: Down at 1.3760
GOLD: Down at USD1,325.90 an ounce
OIL (Brent): Down at USD105.55 a barrel

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Key UK Corporate News

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FTSE 100: Homeware and clothing retailer Next reported higher profits and revenues for its recent financial year, driven by its online business and signalled its confidence by raising its dividend by 23%, but said it expects the UK consumer environment to remain far from buoyant. GlaxoSmithKline said that a late stage trial of its MAGE-A3 cancer immunotherapeutic for patients with non-small-cell lung cancer did not meet two of its co-primary endpoints, as it failed to extend disease-free survival compared to a placebo. United Utilities Group said it expects to report revenue and underlying profit in its upcoming full-year results that are higher than the year before. Lloyds Banking Group has sold a portfolio of European commercial real estate loans for about EUR280 million as part of its strategy to scale down its non-core run-off portfolio.

FTSE 250: Investec said it expects its full-year operating profit to be marginally ahead of the previous year, as the specialist bank and asset manager coped with a significant depreciation of the rand against sterling over 2013. UK Commercial Property Trust swung to profit in the full-year, after last year's results were dented by valuation losses, and said it planned to move towards a more "sustainable" dividend policy.

AIM: Shares in Rose Petroleum are trading higher. The natural resources company said its total revenue for its fourth quarter 2013 was flat, while its direct production costs fell significantly during the period. Trakm8 Holdings also is trading up after the firm was awarded a significant hardware order from a major UK wireless security and safety provider, part of a recently signed supply agreement which it expects to lead to revenues in excess of GBP1 million per year. Shares in EMED Mining rose in morning trading after the firm appointed Isaac Querub as chief executive of the company and vice president of its subsidiary EMED Tartessus, with immediate effect. It also said it has appointed Alberto Lavandeira as chief operating officer of the company and chief executive officer of EMED Tartessus with effect from April 14. African Potash is trading higher. The potash exploration and development company has completed the acquisition of exploration seismic data at the Lac Dinga Project in the Republic of Congo. At the other end of the market, shares in LED International Holdings have dropped. The group said it is evaluating other potential avenues of funding, and is in advanced discussions with another party, as it is still yet to receive the subscription funds from Rubyfield Holdings and Speedy Dragon Holdings. Retailer Majestic Wine has also seen its shares trade lower after it said it has experienced challenging trading conditions since the start of the 2014 calendar year, and with two weeks to go until its year end, now expects like-for-like sales to be flat for the financial year as a whole, and pretax profit broadly in line with the previous financial year.

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Top Economics And General

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The US central bank could end its buying spree of government-backed bonds by late this year and begin tightening its near-zero benchmark interest rate in the first half of 2015, Federal Reserve Chairwoman Janet Yellen said Wednesday. The Fed's monetary policy committee on Wednesday further reduced the pace of bond buying to USD55 billion a month starting in April, and said that its unprecedented interest rate target would likely remain near zero "for a considerable time" after the end of bond buying. Yellen noted later that "if we continued to reduce the pace of our asset purchases in the manner that we have in measured steps," bond purchases were on a path to conclude in autumn 2014, though not predetermined. She said the "considerable time" before raising interest rates was "hard to define, but, you know, probably means something on the order of around six months or that type of thing." Yellen noted that the labour market and inflation will be fluid and complicated factors: "It depends what conditions are like."
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Confidence among British households regarding their personal finances eased modestly in March, but hovered near February's record high signalling that the squeeze on finances remained less marked than seen over the past five years, survey data published by Markit Economics revealed. The seasonally adjusted household finance index, which measures the overall perception of financial well-being, dropped to 41.9 in March from 42.1 in February, which was the highest score in the history of the survey. Index readings below 50 suggest weakness in confidence.
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Germany's producer prices fell for the seventh successive month in February, and the rate of decline matched economists' forecast, latest data revealed. The industrial producer price index decreased 0.9% in February from the same month of last year, the Federal Statistical Office said. This followed a 1.1% contraction in January. The February outcome matched economists' expectations. Prices have now fallen for the seventh consecutive month.
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Representatives from the European Parliament and EU governments reached a provisional deal on a scheme to shield taxpayers from bank bailouts. The mechanism to wind down troubled eurozone banks is to become the second element of a crisis-thwarting banking union, considered key to restoring trust in the currency bloc. Details of the deal, which was reached after 16 hours of talks, were not immediately available. It still requires the support of the heads of the respective political groups in parliament, who were to meet later Thursday.
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Economic sanctions are on the table as EU leaders meet Thursday to try to ratchet up pressure on Moscow, diplomats said, while Russia prepares to complete the legal process of annexing Crimea by the end of the week. Europe needs a "determined and united response" to the developments in Crimea, German Chancellor Angela Merkel told parliament in Berlin before travelling to Brussels for talks with her 27 EU counterparts. Merkel announced that new names would be added to a list of 21 Russians and Crimeans hit this week with EU asset freezes and travel bans, but it was unclear whether the bloc's leaders would expand the measures from individual sanctions to those having national economic effects.
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Ukraine is drawing up plans to withdraw its military forces from Russian-controlled Crimea, a top government official said Wednesday. National Security and Defence Council chief Andriy Parubiy said the government was preparing a plan to relocate troops from the peninsula to mainland Ukraine, local media reported. He added that Ukraine would ask the United Nations to declare Crimea a demilitarised zone. The Council also ordered a plan to evacuate Ukrainian citizens who do not want to remain in Crimea.
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Objects possibly related to the missing Malaysia Airlines plane have been spotted in the southern Indian Ocean, Australian officials said. "Following specialist analysis of this satellite imagery, two possible objects related to the search have been identified," Prime Minister Tony Abbott told parliament. One of the objects floating 2,500 kilometres south-west of Perth was 24 metres long, an official of the Australian Maritime Safety Authority (AMSA) told reporters.
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The Dutch grand coalition of liberals and social democrats suffered wide losses in Wednesday's local elections amid resistance to austerity measures, with left-leaning opposition parties making gains, according to news reports. The social-democratic Labour Party, PvdA, lost the cities of The Hague and Amsterdam to the centre-left party Democrats 66 (D66), as well as Rotterdam to a green party, according to a report on DutchNews.nl, with more than 90% of the votes counted.
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Greek banks may require more capital than the Bank of Greece estimated this month, the European Commission, European Central Bank and International Monetary Fund said in a joint statement. The lenders, known as Troika, on Wednesday reached a preliminary agreement to unlock the next tranche of bailout funds. Authorities observed that the economy is beginning to stabilize and is poised for a gradual resumption of growth.
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Syria has removed almost half of its chemical arsenal, an international watchdog overseeing the process said. It has scrapped 45.6% of its Category 1 chemicals, considered the most hazardous, along with less dangerous Category 2 chemicals, the Organization for the Prohibition of Chemical Weapons said. Syria remains committed to the destruction of its entire arsenal by June 30, The Hague-based watchdog said in a statement late Wednesday.
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Afternoon Watchlist

14:00 US Existing Home Sales
14:00 US Philadelphia Fed Manufacturing Survey
14:30 US EIA Natural Gas Storage change
19:00 US American Petroleum Institute Monthly Report
20:30 US Bank Stress Test Info

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Friday's Key UK Corporate Events

Mission Marketing Full Year Results

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Friday's Key Economic Events

All Day EU European Council meeting
All Day Japan Vernal Equinox Day
09:00 EU Current Account
09:30 UK Public Sector Net Borrowing
15:00 EU Consumer Confidence Preliminary
20:30 US Fed Minneapolis's Narayana Kocherlakota speech
22:30 US FOMC Member Stein Speech

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By Alice Attwood; aliceattwood@alliancenews.com; @AliceAtAlliance

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