Rishi Sunak’s massive tax grab on big businesses was also likely to play on the minds of investors in big companies after yesterday’s Budget which will see the top 10% of firms shoulder the bulk of a £17 billion annual tax rise by 2025.
The FTSE 100 was being called down 31.8 points at 6619.7 by traders on the IG platform.
A surge in US 10-year treasury bond yields - seen as a proxy for global borrowing costs - hit US markets hard yesterday. The S&P 500 fell 1.3% and the technology-rich Nasdaq fell 2.7%.
Treasury yields climbed to 1.474% - way above the near-zero cost of borrowing from central banks - and indicting future rate rises were inevitable.
The fear is that inflation will rise as the US pushes through Joe Biden’s $1.9 billion stimulus package, forcing the Federal Reserve to hike rates. The US senate has just begun considering the Biden plan.
Much of the reaction to yesterday’s Budget was already in the markets yesterday but investors will be wary as they wake up to analysis in today’s papers of a country which, in a few years, will have its highest tax burden - 35% of GDP - since the late 1960s.
That grim news for big company investors was partly offset by better than expected forecasts from the Office for Budget Responsibility which said unemployment will peak at 6.5% rather than the 7.5% it forecast in November. Furlough schemes and other state support will, if the OBR is right, keep unemployment way below the 8.5% seen in 2011.
That should mean less permanent scarring on the UK economy and more robust profits for UK companies as demand for goods continues to rise as we move through the post-Covid economic recovery.