European stock markets opened higher on Wednesday, ahead of the UK government’s Budget announcement later in the day.
Chancellor Rishi Sunak will unveil the government’s tax and spending plans, including a September extension to the furlough scheme which has safeguarded millions of jobs during the pandemic. Some newly self-employed workers previously excluded from help will also now be eligible for grants.
Investors will be looking at the scale of stimulus measures and government borrowing with Britain’s economy still hobbled by lockdown restrictions, as well as the latest economic forecasts and the impact of new announcements on particular sectors. Reports a stamp duty holiday in England and Northern Ireland will be extended sent housebuilding stocks flying earlier this week.
The FTSE 100 rose 1.1% in early trading on Wednesday, while the FTSE 250 was 0.7% higher. Elsewhere in Europe, the CAC in France was up 0.8% and the DAX in Germany trading 1% higher.
Michael Hewson, chief market analyst at CMC Markets UK, said the chancellor had recognised it would be “incredibly risky” to end support measures such as furlough grants and business rate relief any time soon. He noted some pressure for the chancellor to fix the UK’s deficit with borrowing set to reach more than £300bn ($418.7bn) this tax year, but he said efforts to do so “might actually make recovery that much more difficult.”
“It is entirely right to be concerned at the level of the current deficit, however with borrowing costs still at fairly low levels, even after last week’s rise in gilt yields, the government can afford to be creative when it comes to time frames in narrowing the gap between taxation and spending,” said Hewson.
Deutsche Bank analyst Jim Reid also noted: “The backdrop is a relatively bright one by the standards of recent months, with the UK having had one of the most successful vaccine rollouts of any major country.”
He added that the chancellor’s speech, at around midday in the Commons local time, may include “some unrevealed rabbits that could yet be pulled out of the hat,” on top of many pre-briefed pledges.
Meanwhile US futures were pointing to a higher open on Wall Street later in the day, after declines on Tuesday. S&P 500 futures were 0.7% higher, Dow futures also up 0.7%, and Nasdaq futures 1% higher as trading got underway in Europe.
Asian stocks had rallied overnight. China’s SSE composite index surged 2%, the Hang Seng in Hong Kong rose 2.7%, and Japan’s Nikkei closed 0.5% higher.
“Supporting this has been stronger February services and composite PMIs for many Asian countries,” said Reid.
Source: here