Banking stocks gave the FTSE 100 a lift on Tuesday amid reports that the sector will be spared a tax hit in Wednesday’s budget.
The FTSE 100 index closed up 74.62 points, 0.8%, at 9,609.53. The FTSE 250 ended up 205.83 points, 1.0%, at 21,617.41, and the AIM All-Share closed up 4.93 points, 0.7%, at 742.09.
High street lenders Lloyds Banking Group rose 3.8%, NatWest Group climbed 3.7% and Barclays advanced 2.4% as the Financial Times said Chancellor Rachel Reeves is unlikely to impose further tax hikes on UK banks, calming fears that they could be hit.
The Chancellor will deliver the budget statement to Parliament around 1230 GMT on Wednesday, after Prime Minister’s Questions.
The budget is likely to contain further hefty tax increases as Ms Reeves looks to cover the expected fiscal deficit and seek a higher buffer against future economic shocks.
An extension to the freeze on personal tax allowances, a mansion tax, increases in betting duties, and changes to salary sacrifice schemes are all likely to form part of a smorgasbord approach to tax policy.
But economists are less sure the scatter-gun approach is the right path to follow.
Citi’s Callum McLaren-Stewart called the smorgasbord approach “politically palatable, but economically problematic.”
Kallum Pickering at Peel Hunt said a “haphazard patchwork of smaller anti-growth tax increases” would be a “bad outcome”.
Ahead of the budget, the pound was quoted higher at 1.3183 US dollars at the time of the London equities close on Tuesday, compared to 1.3104 dollars on Monday.
The yield on the UK 10-year gilt was down by 5 basis points at 4.49%.
Reports also suggest the Chancellor may announce a stamp duty holiday for new listings on the London Stock Exchange.
Hargreaves Lansdown’s Emma Wall said this would be a “welcome boost” for the UK stock market which has been “losing out” to New York for initial public offers in recent years.
Currently, investors have to pay 0.5% stamp duty tax when they buy shares, but this is expected to be waived for new listings for up to three years.
In European equities on Tuesday, the CAC 40 in Paris closed up 0.8%, while the DAX 40 in Frankfurt ended 1.0% to the good.
Stocks in New York were mixed after Monday’s stellar gains.
The Dow Jones Industrial Average was up 0.7%, the S&P 500 index was up 0.2%, but the Nasdaq Composite fell 0.2%.
The yield on the US 10-year Treasury was quoted at 4.01%, narrowed from 4.05%. The yield on the US 30-year Treasury was quoted at 4.65%, trimmed from 4.69%.
After the data vacuum caused by the American government shutdown, investors weighed a hefty batch of new figures on the health of the US economy.
Reports were mixed with US producer price growth steady year-on-year in September, while a retail sales rise was tamer than forecast on-month.
According to the Bureau of Labor Statistics, producer prices rose 2.7% on-year in September, in line with August’s rise and meeting the FXStreet-cited consensus estimate.
Separately, the Census Bureau reported US retail sales rose 0.2% in September from August, shy of the FXStreet-cited forecast of a 0.4% rise. In August, sales rose 0.6% from July.
In addition, a report from the Conference Board showed consumer confidence in the US weakened in November, hitting its second-lowest level since April.
The CME FedWatch tool now places an 83% chance of a quarter-point cut at December’s Federal Reserve meeting.
The data weighed on the dollar. The euro stood higher at 1.1569 dollars on Tuesday, against 1.1525 dollars on Monday. Against the yen, the dollar was trading lower at 156.13 yen compared to 156.91 yen.
Back in London, Beazley fell 9.2% as analysts said a planned USD500 million investment to build out a new Bermuda platform will mean a “material” step down in share buyback expectations.
The Lloyds of London insurer announced the news alongside mixed trading results in the first nine months of 2025.
But RBC Capital Markets said the “key new news” was the 500 million dollar capital to be set aside to set up in Bermuda.
Beazley said the investment supports growth from 2026 onward and “supports our expansion into the alternative risk transfer market”.
But UBS thinks this puts a share buyback at the year-end “at risk”, and if there still is one, it could be of a lesser amount than the broker’s USD700 million estimate.
Faring better, Kingfisher rose 6.0% after raising profit guidance for the second time in three months.
The DIY retailer, which owns the B&Q, Screwfix, Castorama and Brico Depot brands, now expects full-year adjusted pretax profit between £540 million to £570 million.
In September, Kingfisher upgraded its profit outlook to the “upper end” of the previously guided range of GBP480 million to £540 million.
On the FTSE 250, AO World jumped 1.5% as it raised its profit forecast after reporting “continued positive trading”.
The Bolton, England-based consumer electronics seller in September upped its profit view to a £45 million to £50 million range.
Since then, AO World said it has seen “continued positive trading”, and it now expects pre-tax profit “around the top” of the outlook range.
But Baltic Classifieds slid 2.2% as JPMorgan double-downgraded it to “underweight” from “overweight”.
The broker thinks online classifieds players will have to “materially” increase their efforts to maintain their gatekeeper position by delivering “undisputable, top-notch, now AI-driven search experiences and relevant information to compete with GenAI agents and new aggregators”.
Brent oil was quoted at 61.71 dollars a barrel at the time of the London equities close on Tuesday, down from 62.90 dollars late on Monday.
The oil price fell amid reports that Ukraine has agreed to the terms of a peace deal with US representatives, although additional reports suggested Russia may block any modified plan.
Gold was quoted at 4,132.40 dollars an ounce, up against 4,097.64 dollars.
The biggest risers on the FTSE 100 were Airtel Africa, up 19.2p at 314.80p, Kingfisher, up 17.5p at 309.9p, Burberry, up 52.5p at 1,168.5p, Barratt Redrow, up 15.5p at 393.9p and Lloyds Banking Group, up 3.3p at 90.6p.
The biggest fallers on the FTSE 100 were Beazley, down 79p at 781p, Intertek, down 278p at 4,592, Pearson, down 21.8p at 985.2p, BAE Systems, down 31p at 1,621p and Compass, down 41p at 2,408p.
Wednesday’s economic calendar has the UK budget, the Beige Book in the US and an interest rate call in New Zealand overnight.
Wednesday’s UK corporate calendar has half-year results from property developer Helical, equipment hire firm Speedy Hire, and celebration cakes retailer Cake Box.
Contributed by Alliance News
