Autumn Statement 2022: how financial markets reacted
17th November 2022 14:21
by Victoria Scholar from interactive investor
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UK chancellor Jeremy Hunt appears to have got markets back on side with his Autumn Statement. Our head of investments looks at what happened after the chancellor sat down.
As hoped for by chancellor Jeremy Hunt, the market reaction to the Autumn Statement has been relatively muted, with the pound trading lower by around 1% against the US dollar, reflecting the Office for Budget Responsibility’s (OBR) forecast that the UK is already in a recession.
However, part of the weakness for cable (GBPUSD) reflects today’s appreciation for the US dollar which is rallying against the euro, the pound, the Swiss franc, and the Japanese Yen.
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The FTSE 250, which is more closely correlated to the domestic economy than the FTSE 100, is trading slightly lower on the day but is little changed from late this morning ahead of Hunt’s announcement.
The bond market has seen minimal volatility today, in stark contrast to the fiscal fiasco around September’s mini-budget which sent government borrowing rates surging and the pound to a record-low of almost parity against the dollar.
The biggest market reaction has been seen among the electricity generators like SSE (LSE:SSE), Drax Group (LSE:DRX), Centrica (LSE:CNA), and National Grid (LSE:NG.) which have seen a highly volatile trading session around today’s Autumn Statement. Stocks in this sector initially moved sharply lower after the chancellor extended the windfall level to energy generators, imposing a 45% levy, ahead of analysts’ forecasts for 40%.
However, these companies swiftly reversed losses to trade multiple percent higher after Hunt announced plans to extend the Energy Price Guarantee for another year until at least 2024. Centrica is the top performing stock on the FTSE 100 today, up by more than 4%.
Shares in BP (LSE:BP.) and Shell (LSE:SHEL) are trading lower after the chancellor unveiled a bigger-than-expected increase to the windfall tax from 25% to 35% versus expectations for a rise to 30%. The oil giants have enjoyed bumper profits, with both Shell and BP shares up by around 40% over the last year, reflecting this year’s supply constraints in key commodity markets driven by the war in Ukraine.
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