Leading shares rallied during the course of Alistair Darling's budget speech, with banks and housebuilders particularly buoyant.
The FTSE 100, down 10.38 points when the chancellor stood up, had recovered to 5672.01, down just 1.62 points by the time he finished. Meanwhile the pound started at $1.4932, fell back to a two week low of $1.4903 on the borrowing forecasts, and stood at $1.4925 by the end of the speech.
Gilts were also fairly stable during Darling's speech but fell back on news the government planned to sell £187.3bn of gilts in 2010/11, even though this was pretty much in line with expectations.
In the background too was the previous news that Fitch had cut its credit rating on Portugal, reviving sovereign debt fears.
Darling's forecast of borrowing being £11bn lower than forecast this year at £167bn pleased investors, given suggestions of a £8bn change.
Angus Campbell, head of sales at Capital Spreads, said:
A safe play budget which lacked anything radical but had digs at the Tories and of course attempted to appeal voters by showing the Chancellor was playing with a straight bat.
In attempting to win over voters he didn't raise VAT, capital gains tax and froze inheritance tax.
As a result, whilst the FTSE drifted sideways, the pound/dollar exchange rate continued to fall against the dollar and looks set to weaken further as international investors turn their back on sterling.
Tim Hughes at IG Index said:
There was very little new but there were better numbers on borrowing. Banks responded to the comments on there not being an immediate banking tax.
The banks were also lifted by new lending requirements, with Royal Bank of Scotland up 0.75p to 44.81p and Lloyds Banking Group lifted 1p to 64p.
Housebuilders benefited from the rise in the stamp duty threshold, designed to help first time buyers. Bellway, which also released pleasing results, was 38p better at 757.5p and Persimmon put on 13.2p to 459.2p.
Strangely Magners maker C&C Group , after an early dip, is up 3.85% despite the 10% hike in cider duty.
