FTSE falls as Johnson set to unveil £10bn-a-year tax rise
Markets made tepid moves on Tuesday morning in London ahead of a new announcement by prime minister Boris Johnson that the UK will announce a tax rise of more than £10bn ($13.8bn) a year.
The tax rise will finance a new tranche of spending on health and social care and has been met with a wave of opposition from Conservative MPs.
Chancellor Rishi Sunak and the prime minister plan to raise national insurance rates by an expected 1.25 percentage points — for both employees and employers. The move is also an attempt to get a handle on public borrowing, which has ballooned during coronavirus.
In Europe, the FTSE 100 (^FTSE) opened 0.3% lower. The DAX (^GDAXI) was trading down 0.1% and France’s CAC (^FCHI) headed 0.1% lower.
“Stock market traders should remember that the European Central Bank (ECB) will release its monetary policy statement on Thursday,” said Naeem Aslam, chief market analyst at AvaTrade.
“This is a major event because investors will be looking for clues as to how and when the ECB plans to exit its massive stimulus programme. Government bond prices are indicating that a correction is imminent.”
US stock futures were slightly higher at the open in London, despite a miss in the closely-watched jobs report on Friday. S&P 500 futures (ES=F) were up 0.1%. The Dow (YM=F) also looked set to open 0.1% higher. Meanwhile, Nasdaq futures (NQ=F) were up 0.2% at the open in London.
“While the recent rise in infections does appear to be impacting growth, most gauges continue to show the US economy in good health,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.
“This will support stocks, in our view, especially in cyclical industries like energy and financials. We continue to advise investors to position for reopening and recovery.”
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Markets in Asia closed higher, with the Hang Seng (^HSI) finishing 0.9% up, the SSE Composite (000001.SS) up 1.6% and Japan’s Nikkei (^N225) also up 0.9%.
Sentiment was stronger after Liu He, China’s vice premier, stated that Beijing would continue to support small-scale private businesses despite regulatory crackdowns on education and technology sectors.
Investor sentiment in Japan has also risen in the aftermath of prime minister Yoshihide Suga’s unexpected resignation.
Investors believe that the next person in charge will be more focused on reducing coronavirus cases and boosting economic growth.
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Read More: FTSE falls as Johnson set to unveil £10bn-a-year tax rise