FTSE rises as traders digest autumn budget aftermath
European stock markets ended in positive territory on Friday as traders digested the aftermath of chancellor Jeremy Hunt’s autumn budget.
In London, the FTSE 100 (^FTSE) rose 0.5% by the end of the day, with a boost from the energy and mining sectors. The CAC (^FCHI) rose more than 0.9% in Paris and the Frankfurt DAX (^GDAXI) was also 0.9% higher.
Earlier on Friday morning, finance minister Hunt said that Britain is facing a challenging time over the next two years, but that his budget would help tackle inflation and put the economy on a stronger footing.
“Over the next two years it is going to be challenging, but I think people want a government that is taking difficult decisions, has a plan that will bring down inflation, stop those big rises in the cost of energy bills and the weekly shop,” he told Sky News.
It came as UK retail sales rebounded in October, according to the Office for National Statistics (ONS).
Excluding fuel sales, the volume of goods sold in shops and online rose 0.3% after a 1.5% fall the month before — impacted by stores closing for the funeral of Queen Elizabeth II.
But this was still lower than economists had expected after forecasting a gain of 0.6%.
The pound (GBPUSD=X) benefited from a slump in the dollar on Friday, up 0.5% during the session, but analysts remain sceptical about sterling's medium-term prospects amidst the gloom.
Walid Koudmani, chief market analyst at XTB.com, said: "The pound is starting Friday's session attempting to hold onto some gains with GBPUSD pair testing the 1.19 area after pulling back to 1.175 yesterday.
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"Meanwhile, the FTSE 100 remains in the 7370 points area and it remains to be seen if it will be able to extend the upward move or fall further as investors continue to be uncertain.”
Across the pond, the S&P 500 (^GSPC) rose 0.4% by the time of the European close, and the tech-heavy Nasdaq (^IXIC) was treading water. The Dow Jones (^DJI) edged 0.6% higher in New York.
Treasury yields were little changed after the previous day’s jump when St. Louis Fed president James Bullard said policymakers should increase interest rates from at least 5% to 5.25% to curb inflation. He also warned of further financial stress ahead.
US markets finished lower for the second day in a row on Thursday on the back of these comments.
Oil (BZ=F) stood poised for a weekly loss as concerns over a worsening demand outlook filtered through the crude market. Demand concerns also weighed on prices due to a continued rise in COVID cases across China.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: "Brent crude is trading at around $89 a barrel, as demand concerns outweigh supply constraints. Specifically, it’s uncertainty around significant monetary tightening from the world’s largest economies causing the blip.
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"The Fed’s comments that there’s still a long way to go to get inflation under control, and the continued expectation of steep interest rate rises means further heat’s going to be taken out of economies, leading to weaker demand for the black stuff.”
Asian stock markets closed in the red overnight after Chinese technology shares came off their intraday highs, and as investors awaited results of quarterly index reshuffling for Hong Kong’s benchmark gauge.
In Tokyo, the Nikkei (^N225) fell 0.1% while the Hang Seng (^HSI) dipped 0.3% in Hong Kong, and the Shanghai Composite (000001.SS) ended 0.6% lower.