The FTSE 100 closed lower on Wednesday, even after the Chancellor unveiled a £30bn stimulus package to get consumers spending again.
London’s blue-chip index closed down 0.55 per cent at 6,156 points after a muted day of trading. The FTSE 250 index of slightly smaller companies finished the day 0.95 per cent lower.
It came after UK chancellor Rishi Sunak’s summer statement in which he introduced a £30bn package to help the economy bounce back.
“The mini-budget – which took a Groupon-approach to stimulus in places… wasn’t robust enough to distract European investors from the continued acceleration of global covid-19 cases,” said Spreadex analyst Connor Campbell.
The market’s muted reaction to the fresh stimulus measures may also be because the Treasury had trailed a number of the announcements earlier this week.
The stamp duty holiday received little attention from FTSE 100 investors since it had been widely anticipated. Housebuilder Taylor Wimpey surged on the back of the speech before closing down 1.77 per cent.
FTSE 250-listed Savills was up 2.5 per cent after Sunak’s speech.
The surprise announcement of the “Eat Out to Help Out” scheme, which will provide a 50 per cent discount for sit down meals in cafes, restaurants and pubs, helped the markets somewhat paired with a drastic cut in VAT.
The Restaurant Group jumped on the news before plunging 4.03 per cent by the end of the day.
While a headline-grabbing offering, it may not be so attractive in the longrun. “The VAT cut may entice some visitors but the Monday-Wednesday time frame and £10 limit for the month of August on dining out may not move the dial much,” said Russ Mould, investment director at AJ Bell.
Investors’ caution may be because “for an economy so reliant on consumer spending, these are just trifles, of little use if consumers remain worried about the longer-term outlook for jobs ad spending,” said Chris Beauchamp, chief market analyst at IG.
US stocks inch up on rebound hopes
Wall Street opened more positively than the FTSE despite recording another increase in infections.
“The UK just reminded Wall Street that the global stock market rally is not likely going away anytime soon as governments globally will now be delivering massive fiscal stimulus responses,” said Edward Moya, senior market analyst at Oanda.
The benchmark S&P 500 is up 0.17 per cent while the Dow Jones is just 0.06 per cent higher. The tech-heavy Nasdaq is leading US stocks, gaining 0.73 per cent.
The jump in cases in the US, which was also seen in Texas, spooked Wall Street yesterday. The S&P 500 dropped 1.1 per cent and the Dow Jones finished down 1.5 per cent. It brought a five-day rally to an end.
“The focus for the US continues to be the economic recovery, which has outweighed a rise in cases that has become the latest bit of bad news to be shrugged off by a market focused on good news and on the positive overspill from the Fed’s liquidity operations,” Beauchamp said.