Spreadex Market Update
Largely positive Budget reaction from FTSE, whilst negative US inflation prepares Dow for FOMC statement
From the FTSE’s perspective George Osborne’s 8th annual budget was, when everything is weighed up, a positive one, rising around 0.7% as the afternoon went on. Gains for the oil and gas stocks, boosted by the abolishment of the petroleum revenue tax and a halving of the supplementary tax (as well as the fact that Brent Crude has re-crossed $40 per barrel), were joined by growth from publicans like Marston’s and Wetherspoons, both pleased the Chancellor froze the beer duty.
Yet the reaction wasn’t universally positive. The announcement of a sugar tax was a bitter pill for Britvic and AG Barr, makers of Tango and Irn Bru respectively, both falling into the red as investors mulled over the impact the newly revealed levy will have on those companies' earnings. The UK’s growth prospects also suffered a severe knock this Wednesday, the OBR revising their forecasts for 2016 from 2.4% to 2.0%, with inflation now expected at 0.7% for the year. Add onto that the OBR’s warning that a Brexit would lead to ‘an extended period of uncertainty’ and the pound took a hit as the afternoon wore on, falling 0.4% against the dollar.
Whilst Osborne revealed what was in his big red box the US plugged away with its own data dump. As forecast inflation slipped into negative territory, arriving at -0.2%, whilst building permits, the capacity utilization rate and the industrial production figures all underperformed analysts’ expectations. The less than promising picture painted by today’s data was likely the final nail in the Fed-hawks’ coffin, increasing the already sky-high chance of inaction from Yellen and co. this evening. Yet investors remained tentative nevertheless, the Dow only managing a mild 20 point rise after the bell.
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