Business as usual for FTSE All Share following Budget announcement
With the FTSE 100 slightly higher and the pound stagnating around the same level as its seven-week low when compared to the dollar, you’d be forgiven for forgetting that there was a budget announcement. Chancellor Philip Hammond’s budget barely made a dent in the stock market and although economic forecasts were raised, he also made sure to say that ‘complacency‘ wasn’t an option if growth was to continue.
FTSE Unmoved
In the immediate aftermath of Hammond’s statement, the stock index rose by 0.1% while the pound slumped by 0.2%, with £1 worth $1.2164. Earlier in the day, however, the pound had already been hovering around a seven-week low. By the time the markets had closed, the FTSE had closed just over half a percent lower and the pound had shown no signs of improvement.
With the UK’s economy expected to grow by around 2% over the next twelve months, which was up from previous estimates, the chancellor also stated that lower growth was now expected over the next four years. The independent office for Budget Responsibility has forecast that the year 2018-19 will see a growth of 1.6%, the following year is expected to have growth of 1.7% and there will be 1.9% growth in 2020-21.
GBP Steady Despite Bearish Forecasts
Hammond’s announcements and the forecasts lacked optimism. Despite this, investors in both stocks and currency seem to be completely unphased.
ETX Capital analyst Neil Wilson remarked that the markets were relatively unmoved by the budget statement, stating that they were taking the budget ‘in their stride‘. He also stated that the budget had a ‘drab‘ feel about it thanks to a lack of content for investors.
Wilson made sure to point out that the Spring budget was merely paving the way for the ‘autumn set piece’. This is likely to have plenty more for investors to get to grips with, particularly because the Brexit landscape is expected to be clearer.
The news that the stock markets were not greatly affected by the budget will have come as no surprise to economists who had already predicted that no big impact would be felt. The lack of any turbulence will be seen as good news to some considering that the UK markets have been through a tough time since the Brexit vote.
Although the pound has stabilised somewhat since the end of last year, it is still said to be volatile and once the Brexit negotiations are underway, we could see the pound suffer another slump according to some economists.