Sterling drops but gas generators lift the FTSE 100

The pound plummeted but London’s top index was propped up by rises in energy companies and banks which breathed a sigh of relief following the Chancellor’s budget.

SSE and British Gas owner Centrica saw their shares push towards the top of the FTSE 100 on Thursday after their gas generation arms escaped unscathed from the windfall tax on energy generators that the Chancellor announced.

“We’ve seen some significant moves because of today’s UK budget, which painted a bleak outlook for the economy over the next two years, and a 7% drop in disposable incomes for UK consumers,” said CMC chief markets analyst Michael Hewson.

“The best performing shares have, somewhat counterintuitively, been SSE and Centrica, despite the announcement of a 45% levy on the ‘excess profits’ of low-carbon energy generators from January 1st.”

The news that the banking surcharge tax would be reduced from 8% to 3% helped out many of the UK’s biggest lenders.

Lloyds, NatWest, Standard Chartered and Barclays were all in the green on Thursday.

The FTSE 100 ended the day down just 4.65 points, closing at 7,346.54.

But for the second budget in a row the pound had a nightmare day. By the time stock markets closed in London the currency had lost more than 1% against the dollar, trading at around 1.18.

“The pound has come under pressure and gilts have sold off, sending yields higher after the Chancellor of the Exchequer outlined a budget that was long on tax hikes and short on spending cuts, although today’s moves have also got caught up today’s rebound in the US dollar and yields in the US,” Mr Hewson said.

In Europe the Dax index rose by 0.2% while Paris’s Cac 40 fell by 0.5%.

New York’s S&P 500 dropped 0.6% and the Dow Jones fell 0.1%.

In company news, Royal Mail wants to slash its letter delivery service to just five days a week as the business reported a £219 million operating loss in the first half of the financial year.

It was a swing from a profit of around £235 million a year earlier and comes as recent strikes cost the company around £100 million.

The company said it is in talks to avoid another series of strikes but is still pushing ahead with plans to make around 6,000 workers redundant.

The biggest risers on the FTSE 100 were Centrica, up 5.08p at 92.06p, Lloyds Banking Group, up 1.32p at 44.45p, Imperial Brands, up 56p at 2,109p, NatWest, up 6.3p at 253.2p, and SSE, up 39p at 1,683p.

The biggest fallers of the day were Ocado, down 54.4p at 671.6p, Hargreaves Lansdown, down 47.6p at 823.6p, Harbour Energy, down 17.9p at 315.8p, Halma, down 102p at 2,247p, and Spirax-Sarco, down 435p at 11,165p.