LONDON MARKET CLOSE: FTSE 250 rallies as UK budget boosts pubs, travel

(Alliance News) - Equities in London closed largely higher on Wednesday, with the domestic-focused FTSE 250 outperforming the large-cap index, notching its best close for more than a year as UK Chancellor Rishi Sunak pledged further support for virus-hit businesses.

In his budget, the chancellor extended the stamp duty holiday from the end of March until the end of June, extended the 5% reduced rate of VAT for the tourism and hospitality sector to the end of September and continued the business rates holiday for the retail, hospitality and leisure sectors until the end of June.

"There wasn't much in the way of surprises in today's budget given so much of it had been pre-leaked beforehand, nonetheless there were still a couple of notable items. For a government that sets great store on fiscal responsibility, the numbers being set aside in respect of the Covid response are being estimated at an eye watering GBP407 billion, with the various extensions that were announced earlier today," CMC Markets analyst Michael Hewson commented.

The FTSE 100 index closed up 61.72 points, or 0.9%, at 6,675.47 on Wednesday.

The FTSE 250 ended up 258.41 points, or 1.2%, at 21,436.32. It was the mid-cap index's best close since February of last year.

The AIM All-Share fell 0.65 of a point, or 0.1%, at 1,188.89.

The Cboe UK 100 ended up 0.7% at 664.60, the Cboe UK 250 closed up 1.6%, at 19,089.10, and the Cboe Small Companies ended 1.0% higher at 13,480.54.

The CAC 40 in Paris advanced 0.4% and the DAX 30 in Frankfurt rose 0.3%.

"The budget once again outlined how the damage caused by the coronavirus crisis has been acute, but there were plenty of fresh bandages and splints administered by Rishi Sunak to mend the broken parts of the economy, boosting hospitality, house builders, retail and airlines. But long term the rehabilitation of the economy is forecast to be swifter," Hargreaves Lansdown analyst Susannah Streeter said.

The UK's recovery from the economic damage caused by coronavirus will be "swifter and more sustained" than previously thought, Sunak told members of Parliament as he set out his government budget.

Sunak said the OBR expects the UK economy will be 3% smaller than it would have been in five years' time because of the coronavirus crisis, but that the economy is forecast to grow this year by 4%, by 7.3% in 2022, then 1.7%, 1.6% and 1.7% in the last three years of the forecast.

Sterling was quoted at USD1.3988 at the London equities close on Wednesday, up from USD1.3946 on Tuesday. Sterling reached an intraday high of USD1.4006 on Wednesday morning ahead of the budget statement.

In London, Britsh Airways parent International Consolidated Airlines Group closed up 6.8% and hotelier Whitbread rose 5.6% as the travel sector was on the up following the budget.

Barratt Developments rose 7.1%, Persimmon 6.2% and Taylor Wimpey climbed 5.4% as housebuilders were also popular with investors on Wednesday.

"The prolonged reduction in stamp duty, a new mortgage guarantee scheme, and an extension to the furlough scheme should sustain high transactions volumes and [house] prices throughout most of this year," Capital Economics analyst Andrew Wishart noted.

The pub sector helped to lift London's mid-cap index. The UK will freeze alcohol duty for the second year in a row.

JD Wetherspoon rose 6.0% and All Bar One owner Mitchells & Butlers climbed 4.9%. On AIM, Young & Co's climbed 2.1%.

Away from the budget, insurer Hiscox shed 12%, the worst-performing mid-cap.

The Bermuda-based insurer swung to a pretax loss in 2020 of USD268.5 million, from a USD53.1 million profit the year prior. Total expenses jumped to USD3.22 billion from USD2.82 billion while gross written premiums remained unchanged at USD4.03 billion.

Chair Robert Childs said the company expects to pay USD475 million in Covid-related claims net of reinsurance, the majority for event cancellation and the remaining for business interruption and other claims.

"These are large sums and disappointingly means that we will make a pretax loss for the year," Childs said, adding that, without Covid-19, Hiscox would have posted a profit of USD207 million.

Wall Street stocks were mixed on Wednesday. The Dow Jones Industrial Average was up 0.4%, but the S&P 500 and Nasdaq Composite shed 0.1% and 0.5%, respectively.

Share price falls for technology firms weighed on the Nasdaq and S&P. Amazon.com was down 0.9%, Netflix down 2.3% and Google owner Alphabet's A shares were 0.6% lower.

"As expectations around the current [US] fiscal stimulus package have gone from grossly underpriced several weeks ago to now priced for perfection. Investors are now turning worried about the perpetual stimulus machines of easy monetary policy and fiscal support throttling down," Axi analyst Stephen Innes noted.

"In a rebalancing trend that started last month, high-flying tech shares are the first to buckle when droplets of concerns hit the ground from the foreboding gathering of policy thunderheads roiling above."

Innes noted cyclical stocks were more popular, with the DJIA getting a boost from aerospace firm Boeing, up 4.4% and banking stocks JPMorgan Chase and Goldman Sachs, which were 2.7% and 2.1% higher at the time of the London close.

The euro stood at USD1.2077 at the European equities close on Wednesday, up from USD1.2072 on Tuesday. Against the Japanese yen, the dollar was trading at JPY106.87, up from JPY106.73.

An ounce gold fetched USD1,722.45 at the London equity market close on Wednesday, down slightly from USD1,727.95 on Tuesday. Brent oil was quoted at USD64.16 a barrel, up from USD63.64.

Thursday's economic calendar has US initial jobless claims at 1330 GMT, after construction PMIs from the eurozone at 0900 GMT and the UK at 0930 GMT.

The local corporate calendar has annual results from insurer Aviva, Ladbrokes owner Entain and industrial turnaround specialists Melrose Industries.

By Eric Cunha; ericcunha@alliancenews.com

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