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FTSE closes on high as UK government borrows another £24bn

·3-min read
Chancellor of the Exchequer Rishi Sunak meets with US Treasury Secretary Janet Yellen (not in picture), in London, for a bilateral meeting ahead of the G7 Finance Ministers meeting on Friday. Picture date: Thursday June 3, 2021.
Chancellor Rishi Sunak is under pressure to balance the books as the UK emerges from the coronavirus pandemic. Photo: PA

Markets in Europe made small gains on Tuesday as UK public sector borrowing showed the government had leveraged another £24bn ($33.4bn) in May.

Despite the hefty figure, the Office for National Statistics said pace of borrowing appears to be slowing, after surge in spending to manage the pandemic. Last year's total was revised downward.

Public sector net debt (excluding public sector banks, PSND ex) was £2.2tn at the end of May 2021 or about 99.2% of GDP, the highest ratio since the 99.5% recorded in March 1962.

The ONS said although the impact of the pandemic on the public finances is becoming clearer, its effects are not fully captured in this data, meaning that estimates of accrued tax receipts and borrowing are subject to greater uncertainty than usual.

May 2021 borrowing was £19.4bn less than in May 2020 but still £18.9bn more than in May 2019. Chart: ONS
May 2021 borrowing was £19.4bn less than in May 2020 but still £18.9bn more than in May 2019. Chart: ONS

At the closing bell in London, the FTSE 100 (^FTSE) was 0.4% higher. Meanwhile, the CAC (^FCHI) and Germany's DAX (^GDAXI) were 0.2% and 0.3% higher respectively.

“As we emerge from the pandemic, we are continuing to support people and businesses to get back on their feet and our Plan for Jobs is working," said chancellor Rishi Sunak.

“It’s also important over the medium term to get the public finances on a sustainable footing. That’s why at the budget in March I set out the difficult but necessary steps we are taking to keep debt under control in the years to come.”

Meanwhile, supermarket chain Morrisons' (MRW.L) share price retreated slightly following a more than 30% bump the day before. By 8.30am in London it was trading 0.5% lower.

Alongside traditional markets, the crypto world was thrown into turmoil today, as it appeared the price of bitcoin (BTC-USD) was in freefall. The token's price price plunged on Tuesday afternoon to below $30,000 as China continued its regulatory crackdown.

The world's biggest cryptocurrency was down roughly 12%, trading at $29,047 (£20,909). It had started the year at around $29,374, which means it has essentially erased any gains made in 2021.

Read more: Why Morrisons has become a takeover target

Over the weekend news broke that private equity house CD&R had put in an unsolicited offer for the chain, which was rebuffed because Morrisons said it "significantly" undervalued the firm. Reports on Monday compounded rumours that CD&R was likely to make another bid before its deadline under takeover rules in July.

Across the pond, US stocks made muted moves compared to the previous day of strong gains, with the S&P 500 (^GSPC) trading 0.4% higher, the Dow (^DJI) looking up 0.2% and the Nasdaq (^IXIC) also up 0.5% by the close in London.

On Monday, the Dow had increased by 1.76%, while the S&P 500 increased by 1.4%. The Nasdaq, the tech-savvy index, hopped 0.79%.

"Following last week's bloodbath, the stock markets had a massive rebound in yesterday's session," said Naeem Aslam, chief market analyst at Avatrade.

"Fed officials forecasted on Wednesday that interest rates will be raised twice in 2023, from their current record low, triggering a market panic. The earlier-than-expected rate hike is a reaction to rising inflationary concerns generated by a faster economic recovery."

Overnight in Asia, stocks were mixed. Japan's Nikkei (^N225) closed 3.1% higher, rebounding from losses a day earlier and tracking the gains made Stateside.

Elsewhere, in Hong Kong, the Hang Seng (^HSI) softened to close 0.1% lower and the SSE Composite Index (000001.SS) rose 0.7%.

Watch: What is inflation and why is it important?