Investors help off making big bets on UK equities on Friday, with the UK budget dominating the narrative amid fears of the introduction of a raft of measures that could stifle economic growth and dent confidence in UK stocks.
Despite a strong gain in US futures and mild gains in European equities, the FTSE 100 was dead flat at the time of writing after trading in a tight 20-point range for most of the session.
A strong session for NatWest following the release of Q3 helped to offset weakness in Lloyds and Smith & Nephew, resulting in no change in the index.
“The FTSE 100 is in a holding pattern at the end of the week, as the UK Budget looms and investors remain highly cautious. The index has opened lower, with little to ignite overall investor sentiment,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
“However, buoyant results from NatWest, as it joined the banking results party, did provide some cheer with the stock more than 3% higher in early trade.
“As the guessing game continues about what Chancellor Rachel Reeves will include in her first Budget, it’s dented consumer confidence in the UK. A closely watched survey from GfK indicates that a despondent mood has taken hold ahead of revelation of the government’s tax and spending plans with concerns about the UK economy rising.”
Investors are concerned about a tax raid on their capital gains and savings, while businesses fear additional taxes that could curtail growth. The combination is doing the UK stock market no favours, and the market will look forward to certainty returning as the budget is delivered next week, although new measures may have damaging ramifications for UK equities.
Lloyds
Lloyds shares sank 4% after the UK Court of Appeal ruled against Lloyds and other financial institutions in motor financing appeals that could lead to billions in redress. Close Brothers was more heavily hit by the decision, with shares falling 15%.
Lloyds has already set aside £450m for potential redress, but there will be fears they are forced to make further provisions. Investors clearly have PPI litigation that cost banks billions fresh in their minds and decided to sell down holdings in banks ahead of further developments.