By Carla Mozee, MarketWatch
Standard Chartered lands ratings upgrade
LONDON (MarketWatch)--Stocks climbed in London Wednesday,
extending gains after the government laid out its budget, but the
pound was hit against the dollar as slower-than-expected wage
growth and dovish Bank of England comments underscored expectations
that interest rates will be left on hold.
Stocks: The FTSE 100 was up 1.4% at 6,933.36 and the midcap FTSE
250 rose 0.9% to 17,355, after Chancellor of the Exchequer George
Osborne presented the coalition government's 2015 budget to
lawmakers. It is the final budget before the U.K. general election
in May.
The budget generally met projections, "with all the giveaways
that one might expect to various constituents...including
pensioners, measures to address inequality for the lower-paid, and
the squeezed middle classes...as he is going to raise threshold
that one starts paying 40% tax," said Nick Beecroft, senior market
analyst at Saxo Bank.
The chancellor discussed overhauling taxes for the North Sea oil
industry, which has been hurt by the slide in oil prices. The
measures could add up to GBP1.3 billion in tax reductions. Shares
of major oil companies Royal Dutch Shell PLC and BP PLC bounced up
1.4% and 1.3%, respectively. But BG Group PLC was off 0.6%.
Housing stocks stayed higher, with the "imaginative idea of
matching a 25% contribution to whatever people save toward home
deposits," Beecroft said. Home builder Taylor Wimpey PLC climbed
2.5%, Barratt Developments PLC was up 0.9% and Persimmon PLC rose
0.4%.
Bank shares largely held gains after Osborne announced plans to
increase an annual bank levy by 0.21%, a move he said will raise
GBP900 million to support economic recovery following the financial
crisis. HSBC PLC was up 0.9% and Barclays PLC picked up 0.2%.
Shares of Lloyds Banking Group PLC slightly extended losses to
0.7%, after Osborne said the government will sell more than GBP9
billion shares in the lender this year. The bank is roughly 24%
owned by the government, stemming from its bailout in 2007.
Stock in Royal Bank of Scotland traded lower by 0.8%, but
Standard Chartered PLC rallied 7.2%, extending gains as the
Asia-focused bank started the session with a ratings upgrade to
overweight from equal weight at Barclays.
Among the few decliners on the FTSE 100, miner Randgold
Resources Ltd. fell 0.2% and enterprise-software maker Sage Group
PLC was fractionally lower.
Osborne outlined plans to tackle tax evasion that would raise
GBP5 billion a year. Such plans include the so-called "Google Tax"
that will be implemented on April 1
(http://www.marketwatch.com/story/uk-lays-out-how-google-tax-will-work-2014-12-11).
The 25% tax on profit of multinational technology and other firms
was detailed in December.
He also outlined forecasts from the Office for Budget
Responsibility
(http://www.marketwatch.com/story/uk-budget-forecasts-strike-upbeat-tone-for-economy-2015-03-18),
including a 2015 growth forecast of 2.5% from 2.4% estimated in
December, and a projection the country will borrow a
less-than-previously forecast GBP90.2 billion ($133 billion) in the
year to March 2015.
Sterling: The pound (GBPUSD) fell to $1.4664 from $1.4749,
knocked back to levels last seen in mid-2010. Wednesday's drop came
after minutes from the Bank of England's March policy meeting
(http://www.marketwatch.com/story/bank-of-england-sounds-alarm-over-stronger-pound-2015-03-18)
showed officials are concerned a rise in the pound against
currencies of the U.K.'s key trading partners will weigh on prices
for imported goods, keeping inflation levels lower for longer.
Annual inflation in January was 0.3%, well below the bank's 2%
target, giving little reason for the central bank to raise its
benchmark rate from the record low rate of 0.5%. All nine policy
members in March voted to hold the rate steady.
At the same time, January data from the Office for National
Statistics showed annual wages grew by 1.6% excluding bonuses.
Analysts polled by FactSet had expected growth of 1.8%.
"The recent positive run of earnings data has countered the low
headline inflation readings, but this lower wage growth is now
concerning," wrote Alex Edwards, head of the corporate desk at
UKForex, in a note.
Investors will turn to the Federal Reserve's policy statement
that's due after trading closes in the U.K., and there's concern
the central bank will indicate it'll begin raising interest rates
this summer.
Against the shared European currency, the pound (GBPEUR) pound
was buying 1.3816 euros compared with around EUR1.3912 late
Tuesday.
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