Another day and another trading session in which the FTSE 100 misses out on the broader zest of global equities.
Not even another record high and the break of the substantial psychological level of 40,000 for the Japanese Nikkei fired up UK equity bulls on Monday.
“After starting on the front foot, the FTSE 100 dipped in a seesaw start to the session. The index was dragged lower by financials ahead of this week’s UK Budget,” said AJ Bell investment director Russ Mould.
“A cautious mood pervaded despite Japan’s Nikkei 225 breaking new ground to trade above the 40,000 mark. The push for the index to new all-time highs is undoubtedly a key milestone but whether it truly marks an end to more than three decades of stagnation is still up for debate. One swallow doesn’t make a summer and the fact it has taken since 1989 for the index to claim a new record high is probably cause for some reflection rather than outright celebration.”
Although there was mild positivity in European indices, the FTSE 100 was firmly lower, shedding 0.6%.
BT was the top riser with a gain of 1.8% as the FTSE 100 fell 0.6%. The index was dragged lower by weaker miners, banks and housebuilders.
Ocado fell 5% as the FTSE 100’s biggest faller.
Budget
With the UK government’s last budget before the general election scheduled for this Wednesday, UK-centric sectors will be in focus as investor position for any potential policy changes.
However, it is not yet clear what to expect from the chancellor, who will have his hands tied by the threat of a rerun of the fallout in financial markets following Liz Truss’s doomed autumn statement.
Jeremy Hunt and Rishi Sunak would like to be in a position to announce a wave of tax cuts to win over voters ahead of this year’s general election, but that may be beyond their reach. Markets will expect business-friendly policies as well as long-overdue amendments to savings products.
The UK government is under pressure to revive UK equity markets, and any fresh measures unveiled this week will be aimed at encouraging retail investor participation in stocks.
“With blue-chip stocks finding it hard to regain their mojo and the swoop on British companies continuing, rumours are swirling that Jeremy Hunt will try and revitalise the London markets, by offering tax incentives to retail investors,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
“While and increase to the annual ISA allowance would be hugely welcome, he should steer clear of introducing a ‘British ISA. This would add unnecessary complexity and could have a negative impact on UK investors.”
The FTSE 100’s housebuilders could have been in for quite a week if Jeremy Hunt announced a 1% mortgage but this has supposedly now been ditched.