London equities fall on fiscal concerns from banks and industrials

FTSE Futures

FTSE Futures ended the day lower on Tuesday, influenced by rate-sensitive banks, industrials, and utility stocks amid growing investor worries regarding public finances. The blue-chip index closed 0.9% lower, while the domestic-focused midcap index fell 2.2%. Both experienced their most significant decline in almost five months. Britain’s 30-year borrowing costs reached their highest levels in over 27 years, while sterling fell more than 1.5%, reflecting investor concerns regarding the UK’s capacity to manage its finances effectively.

Thirty-year gilt yields increased to 5.72%, marking the highest level since May 1998. On Monday, Prime Minister Keir Starmer reshuffled his senior advisory team to enhance economic expertise ahead of an upcoming budget anticipated to feature additional tax increases. This decision, however, has also generated headlines suggesting a diminishment of finance minister Rachel Reeves’ position. “There’s a sentiment that the government lacks a definitive solution …they’ve been proposing various ideas to address the budget deficit (but) don’t appear to have a solid plan,” stated Nick Saunders.

“Alongside the recent cabinet reshuffle in London, there are concerns that the chancellor may be departing soon.” Heavyweight banking stocks, which had marginally rebounded in the previous session after Friday’s declines, fell on the day. On Friday, they experienced a decline following a think-tank’s suggestion of a new tax on lenders as a potential method for Reeves to generate revenue.

  • The real estate sector declined, with Segro down 3.9%.
  • Utility stocks fell, with SSE losing 3.7%.
  • NatWest, Barclays, and Lloyds were down about 2% each.
  • Insurers Legal & General and Phoenix fell over 4% each.
  • Retailers and consumer groups such as Tesco, M&S, and British American Tobacco also declined.
  • Travel and leisure stocks fell.
  • British Airways owner IAG was down 3.3% and Whitbread lost 4.5%.
  • Aerospace and defence companies also fell, with Rolls-Royce down 2.9%.
  • Conversely, the energy sector added 0.5%, tracking higher oil prices.
  • The healthcare sector rose 0.2%.
  • Precious metal miners are tracking higher gold prices, with Fresnillo up 5.2%.

In company news, Ithaca Energy opened new tab fell 13.3%, to the bottom of the mid-cap index, after its two largest shareholders sold a stake of about 3% at a discount. Oxford Nanopore Technologies fell 12.8% on keeping full-year guidance unchanged, despite expectations of an upgrade.