The London stock market firmed yesterday despite Britain chopping its growth forecasts over Brexit, while Frankfurt fell on the continued political uncertainty in Germany.
Across Europe, London’s FTSE 100 edged up 0.1% at 7,419.02 points at close; Frankfurt’s DAX 30 was down 1.2% at 13,015.04, while Paris’ CAC 40 fell 0.3% at 5,352.76.
The British capital’s benchmark FTSE 100 closed the day up after Finance Minister Philip Hammond’s unveiled the Conservative government’s tax and spending plans.
While the deficit is set to come in at £49bn in the fiscal year that runs through to April, some £8bn less than previously thought, the growth outlook was revised down though 2021 thanks to Brexit.
The pound initially fell, but later recovered and rose against the dollar, while the gains on London’s FTSE 100 index accelerated before gains faded away in late trading.
“Perhaps the big surprise was that the pound didn’t suffer more as a result of the abysmal growth and productivity forecasts,” Chris Beauchamp, Chief Market Analyst at online trading firm IG.
The dollar was for its part hobbled by data showing a drop in durable goods orders when the market had been expecting a gain.
Shares in RBS fell after the government announced in the budget that it plans to relaunch the sale of most of its stake in the rescued lender by March 2019, spreading the sale out over five years. The bank’s shares fell 1.4 %.
The travel sector also grabbed investors’ attention, with shares in Thomas Cook slumping 9.8% on London’s second-tier FTSE 250 index after the group’s poorly-received earnings update.
Elsewhere in Europe, Frankfurt’s DAX 30 index slinked lower after talks on forming a government coalition in Germany collapsed over the weekend.
Pressure mounted yesterday on Germany’s Social Democrat leader Martin Schulz to reconsider an alliance with Chancellor Angela Merkel’s conservatives to stop Europe’s biggest economy from sinking into months of paralysis.
Schulz has repeatedly said the SPD would not return as the junior coalition partner in a government led by Merkel, after suffering a stinging defeat in September’s general election.
Frankfurt stocks sank “presumably due to the lack of political progress in Germany”, noted Spreadex analyst Connor Campbell.
Europe’s markets diverged following Asia’s rally, which saw Hong Kong finish above the 30,000 points mark for the first time in 10 years after another record close on Wall Street.
Asian and US investors were back in buying mood this week on optimism about the world economy and earnings, while they remain upbeat that US lawmakers will eventually push through much-vaunted tax cuts.
Traders study information on screens at ETX Capital in central London (file). The benchmark FTSE 100 edged up 0.1% at 7,419.02 points at close yesterday.
