By Jack Barnett
London’s FTSE 100 was dragged lower today by investors ditching UK banks on fears they will be hit by a windfall tax by new chancellor Jeremy Hunt.
The capital’s premier index fell 0.17 per cent to 6,924.99 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, tumbled 1.61 per cent to 17,247.55 points.
Hunt is thought to be eyeing reversing plans to drop the bank surcharge to three per cent from eight per cent to prevent them being taxed too punitively after the corporation tax rise next April.
A treasury spokesperson said nothing is “off the table”. Hunt is scrambling to fill an around £30bn hole in the public finances before he delivers his medium term fiscal plan on 31 October.
Shares in the UK’s biggest banks dropped sharply today.
Lloyds, Britain’s largest mortgage lender, shed 4.68 per cent, while NatWest tanked over two per cent.
Barclays also fell, but HSBC rose.
Analysts said the FTSE’s losses were offset by a string of positive earnings reports on Wall Street boosting market sentiment.
“Third quarter earnings season from the US may help to set the mood and so far, companies seem to be performing well, albeit against some pretty modest expectations,” Russ Mould, investment director at AJ Bell, said.
“For now, corporate America seems to be standing up well to the inflation storm, but a lot will depend on the big tech companies reporting next week – with the destiny of the markets in the hands of the likes of Apple, Alphabet and Amazon,” he added.
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