By Jack Barnett
London’s FTSE 100 notched gains yesterday driven by stocks exposed to interest rates receiving a boost from reports the government will roll back some of the mini-budget.
The capital’s premier index jumped 0.35 per cent to 6,850.27 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, surged 1.91 per cent to 16,929.26 points.
Reports emerged yesterday indicating Number 10 officials are drawing up plans to water down some of chancellor Kwasi kwarteng’s £43bn worth of tax cuts in last month’s fiscal statement.
The Sun said prime minister Liz Truss is mulling reinstating the corporation tax rise. It is unclear if it would be the full six percentage point increase.
Those rumours tamed UK gilt markets yesterday. Yields across the curve fell sharply, with the 30-year gilt losing more than 40 basis points. Yields and prices move inversely.
Hopes of a financial market cooldown boosted sentiment to house builders and banks, which are highly sensitive to interest rates.
NatWest and Lloyds, which were battered on Wednesday, climbed 7.67 per cent and 6.86 per cent respectively.
House builders Barratt Developments and Persimmon were also up more than five per cent a piece.
Soaring gilt yields has raised swap rates sharply, forcing banks to pull mortgage products and casting uncertainty over the trajectory of the UK’s property market.
The pound surged over two per cent against the US dollar to levels notched before the mini-budget.
Investment bank Nomura this week said sterling will drop below parity with the greenback.
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