CHANCELLOR George Osborne’s rejigging off his fiscal policies failed to jolt markets yesterday, while investors would not allow themselves to be spooked by lower growth forecasts from the Office for Budget Responsibility.
The UK’s fiscal watchdog slashed its estimate of UK growth for 2012 to minus 0.1 per cent, down from its previous estimate of 0.8 per cent.
Sterling initially dipped against the US dollar, losing 0.05 per cent, yet pared losses as the afternoon trading progressed.
And equities were even less affected by the new forecasts, or the news that the UK’s worse than planned debt and deficit situation could see austerity measures extended until 2018.
“A shock-free update saw equities trade in a tight range throughout,” commented Michael Hewson of CMC Markets, “with gilt yields fractionally lower as fixed income traders gave their approval to tax breaks for small and medium sized businesses, and a further cut in corporation tax.”
The FTSE closed up 0.39 per cent at 5,892.08 while gilt yields ended 1.82 per cent down.
Nick Beecroft of Saxo described Osborne’s statement as “all very boring and predictable”, reflecting the market’s mood.