LONDON, Oct 3 — UK’s blue-chip shares hit March lows today, dragged down by banking and consumer stocks, as markets struggled with uncertainty following the Truss government’s reversal of tax cuts in their new fiscal policy.
The British government reversed plans to cut the highest rate of income tax after their “mini-budget” had, on Friday, prompted rating agency S&P Global to cut their outlook to “negative” and sparked turmoil in financial markets last week, sending the mid-cap index mark on its steepest weekly decline since March.
The export-oriented FTSE 100 and the FTSE 250 mid-cap indexes shed 1.0 per cent each by 0833 GMT.
Yields on British government bonds fell below levels hit when the “mini-budget” was presented on September 23, while the sterling rose 0.5 per cent.
“Anytime you have a government who’s basically changing their mind, it’s very hard to plan and you have to have a risk premium on UK assets because of the uncertainty,” said Patrick Armstrong, chief investment officer at Plurimi Wealth.
The core issue is still that prices are high, consumer confidence is low, with the central bank not expected to turn dovish any time soon, he said.
The decline in US equities is in tandem with a drop in global risk appetite, with worsening PMIs hampering the growth outlook.
British manufacturing output fell for a third month in a row in September and orders declined for a fourth consecutive month, data showed.
Banking stocks tumbled 1.9 per cent, while consumer companies such as British American Tobacco and Unilever slipped 0.8 per cent each.
A rise in oil companies helped cap the declines, after crude prices jumped 4 per cent as Opec+ considered cutting output by more than 1 million barrels a day.
On the mid-cap index, Essentra Plc advanced 11.2 per cent after it announced the sale of its filters business and appointed Scott Fawcett, managing director of its components division, as its new chief executive.
Telecom Plus PLC soared 16.7 per cent after it gave an upbeat profit outlook. — Reuters
