The UK’s recent budget announcement aimed at rejuvenating the economy without unsettling markets yielded a mix of outcomes, influencing various sectors. From fluctuations in sterling and bonds to the reactions of brewers, builders, and the stock market, this article explores the winners and losers in the wake of Chancellor Hunt’s fiscal decisions.
1. Sterling and Bonds:
- Sterling faced cautious sentiment as lower growth forecasts for 2024 impacted its performance.
- Bond markets experienced pressure as investors reacted to smaller-than-expected cuts to gilt issuance plans.
- British bond yields rose post-budget, reflecting market response to the fiscal measures outlined by Hunt.
2. Business Boosts and Stock Market Reaction:
- Equities focused on business-boosting measures, including the permanence of full expensing on investment.
- Domestically-focused FTSE 250 index outperformed the large-cap FTSE 100, rising by 0.7%.
- Business-related measures positively impacted stocks, with BT shares rising by 4.1% due to significant investments in a new fiber network.
3. Brewers and Alcohol Duties:
- Alcohol duties were frozen until August 1, 2024, leading to positive market reactions for brewers.
- Shares in Fuller, Smith & Turner rose by 2.2%, and pub operator Marston’s saw a 2.1% increase.
4. Builders’ Reaction:
- The budget lacked a significant boost for homebuilders, introducing smaller measures to address planning system bottlenecks.
- Homebuilding stocks, which had underperformed, closed down 0.5%, reflecting a muted market response to the budget’s impact on the sector.
5. Gilt Issuance and Bond Yields:
- Gilt issuance plans fell short of expectations, leading to a rise in British bond yields.
- The Debt Management Office’s plan to sell £237.3 billion ($295.7 billion) of gilts in 2023-24 prompted a market response.
- Britain’s 10-year gilt yield finished up 6.8 basis points at 4.175%, above the session low.
6. Market Concerns and Sterling’s Performance:
- Investors remained cautious, with markets pricing in a 50% chance of a UK rate cut by June.
- Sterling struggled to gain traction, falling against the dollar and the euro, indicating concerns about inflationary implications.
- Goldman Sachs had warned of potential inflation risks with a more substantial fiscal loosening.
Conclusion: The UK budget’s impact on various market segments reveals a nuanced landscape with winners and losers. From the nuanced reactions of sterling and bonds to the positive outcomes for businesses and brewers, Chancellor Hunt’s fiscal decisions set the tone for economic dynamics in the coming months.
