London close: Stocks flat as investors digest Budget

21st Mar 2012 16:47

- FTSE 100 unchanged on the day after subdued reaction to Budget- MPC unanimous on interest rates, divided on QE- Weir slumps on negative read-across from Baker HughesThe markets gave a rather muted reaction to today's Budget announced by Chancellor of the Exchequer George Osborne at lunchtime, finishing more or less flat on the day."To the extent that the overarching aim of today's Budget was to retain the confidence of gilt market investors, it can be declared a success," analysts at Barclays Capital said. "The government's deficit reduction plan has been tweaked but not fundamentally altered, and financial markets were unruffled. The Office for Budget Responsibility has again pronounced that the government is on track to meet its fiscal mandate, and although the UK's triple-A status remains precarious, a downgrade does not appear imminent."HIGHLIGHTS OF THE BUDGET...Osborne committed to tax changes for companies producing oil and gas in the North Sea and appears to have granted £3bn in field allowances for the as yet undeveloped area to the west of the Shetland Islands. Meanwhile, corporation tax, currently due to fall to 25% in April, will be cut by a further one percentage point to 24%. Two further cuts planned for next year and the year after mean it will come down to 22% by 2014.The Chancellor confirmed that there will be an automatic review of the state pension age "to ensure it keeps pace with increases in longevity". Meanwhile, the personal tax allowance has been raised to £9,205, an increase of £1,100, from April 2013 and £10,000 in 2014 - one year earlier than planned. Osborne declared that planning regulations were going to be cut from 1,000 to 50 pages, which will certainly please the UK construction sector.MPC MEMBERS DIVIDED ON QEIn other news, the Monetary Policy Committee (MPC) voted unanimously to maintain its Bank Rate at a record-low level at the last meeting, but two members were opposed to keeping the asset purchase programme on hold. Both David Miles and Adam Posen called to increase in QE by a further £25bn to £350bn "to reduce the risk that persistently weak growth would damage the future supply capacity of the economy." Analysts at Barclays Capital had expected both decisions to be unanimous. The Committee did however highlight the sharp increase in crude oil prices, with Brent rising 12% since the end of January. "If oil prices were to rise to a level significantly higher than the Committee currently assumed, then that would tend to slow the global and domestic recovery, reduce supply growth, and put upward pressure on domestic costs and prices." In other news, UK public sector borrowing figures are out and significantly higher than expected. Public sector net borrowing (excluding interventions) was £15.2bn in February, compared to consensus estimates of £8bn.RETAILERS, CONSTRUCTION STOCKS RISE AS STOCKS REACT TO BUDGETOsborne's Budget revealed that all-day trading on Sundays will be allowed from July 22nd to coincide with the Olympics and Paralympics, something that is sure to please the likes of Sainsbury, Marks & Spencer, Morrison, Dixons and Home Retail, all of which were making decent gains. Sainsbury was the high riser on the FTSE 100 after its fourth quarter like-for-like (LFL) sales growth scame in ahead of expectations.Meanwhile, with the government attempting to make planning applications easier to push through, construction peers Berkeley, Bovis Homes, Persimmon and Redrow were performing well.Cigarettes group Imperial Tobacco was a high riser on the blue chip index despite its UK General Manager, Amal Pramanik, telling the Wall Street Journal that Osborne's increase in tobacco duty (announced in the Budget) is a "big mistake" that will "simply tempt more smokers to buy illicit tobacco products". The rise is expected to add around 37p to the cost of a standard pack of 20 cigarrettes. Utilities group National Grid was advancing after the government said it wants to encourage investment in infrastructure, which includes funding from international pension funds and sovereign wealth funds, something which Nomura thinks is "supportive for companies planning to make large infrastructure investments such as National Grid." BROKER UPGRADES HELP WOLSELEY, SERCO, VODAFONE & DEBENHAMSPlumbing giant Wolseley rose after Credit Suisse reiterated its outperform rating on the stock and lifted its target price from 2,400p to 2,850p. Outsourcing giant Serco was making gains after both HSBC and Morgan Stanley upgraded their rating on the stock to overweight and lifted their target prices from 550p to 635p. Telecoms giant Vodafone was also advancing after Goldman Sachs upgraded the stock from buy to conviction buy. Debenhams was gaining on the FTSE 250 after Citigroup upped its recommendation on the stock from hold to buy, a day after reporting that LFL sales had accelerated towards the end of the first half. Leading the decline on the FTSE 100 was engineering group Weir, perhaps due to a negative read-across from US oilfield services group Baker Hughes. The US firm has this afternoon told investors to expect lower operating profits in the first three months of the year due to, "rapidly changing market conditions in the pressure pumping product line in North America and seasonality in all international markets." BCFTSE 100 - RisersSainsbury (J) (SBRY) 319.30p +4.52%Randgold Resources Ltd. (RRS) 6,595.00p +3.21%Fresnillo (FRES) 1,737.00p +2.96%Wolseley (WOS) 2,558.00p +2.61%Imperial Tobacco Group (IMT) 2,558.00p +2.57%Marks & Spencer Group (MKS) 389.50p +2.50%Polymetal International (POLY) 968.00p +1.84%Intertek Group (ITRK) 2,500.00p +1.63%International Power (IPR) 366.90p +1.61%ARM Holdings (ARM) 593.50p +1.54%FTSE 100 - FallersWeir Group (WEIR) 1,859.00p -6.21%Aviva (AV.) 353.00p -5.54%Standard Life (SL.) 236.50p -3.55%Eurasian Natural Resources Corp. (ENRC) 643.50p -3.01%Admiral Group (ADM) 1,168.00p -2.50%International Consolidated Airlines Group SA (IAG) 173.30p -2.48%Man Group (EMG) 138.50p -1.84%BAE Systems (BA.) 309.00p -1.47%Sage Group (SGE) 291.20p -1.42%Tullow Oil (TLW) 1,480.00p -1.40%FTSE 250 - RisersDixons Retail (DXNS) 18.80p +7.61%Home Retail Group (HOME) 122.50p +5.69%Imagination Technologies Group (IMG) 703.00p +4.46%Barratt Developments (BDEV) 148.80p +4.42%Gem Diamonds Ltd. (DI) (GEMD) 310.60p +3.36%EnQuest (ENQ) 132.60p +3.27%Bovis Homes Group (BVS) 508.50p +3.16%Cookson Group (CKSN) 716.00p +3.10%Regus (RGU) 107.10p +2.98%Exillon Energy (EXI) 193.70p +2.81%FTSE 250 - FallersTalvivaara Mining Company (TALV) 245.90p -4.91%Big Yellow Group (BYG) 310.00p -3.73%Ocado Group (OCDO) 118.80p -3.65%Chemring Group (CHG) 421.50p -3.08%Millennium & Copthorne Hotels (MLC) 484.60p -3.06%Avocet Mining (AVM) 187.20p -2.75%Northgate (NTG) 215.40p -2.75%John Laing Infrastructure Fund Ltd (JLIF) 106.60p -2.65%Perform Group (PER) 309.00p -2.59%Savills (SVS) 373.00p -2.41%