Shortly after Midday Philip Hammond, the UK’s chancellor of the exchequer, will announce the latest Budget in what is sure to be a highly scrutinised event. The pound is under pressure going into the fiscal announcement and has fallen through the 1.22 handle against the US dollar. The FTSE 100 continues to plod on in a fairly boring manner, with the benchmark little changed on the day after recently pulling back from record highs.
UK growth forecasts to be revised higher?
Yesterday the Organisation for Economic Co-operation and Development (OECD) revised higher its 2017 GDP forecasts for the UK to 1.6% (from 1.0% previously) and in doing so joined a host of bodies who have recently grown more optimistic on the UK economy. With the Bank of England predicting 2% growth this year there is some expectation that Mr. Hammond will revise higher the Treasury’s forecasts in what would likely be seen as a vote of confidence in the country’s economic health. In terms of alterations to the current levels of spending or taxation there is unlikely to be anything major with the chancellor likely to emphasise the need to put the public finances on firmer foundations going forward due to the possible turbulence associated with the Brexit. This could see the announcement of less government borrowing ahead, with Mr. Hammond aiming to allow himself greater flexibility by building a “Brexit warchest” to increase his ability to adjust future budgets should the UK’s exit from the EU go less than swimmingly.
Gold stocks losing their shine?
The worst performing stock on the leading UK index this morning is Randgold Resources (LON:RRS) with the firm seeing some selling pressure as the price of Gold continues to fall. Futures contracts on Gold have risen fairly strongly so far this year after plummeting into the end of 2016 following Trump’s victory in the US election. However recent signs suggest that the downtrend could be set to continue with market-implied probabilities suggesting that the Fed is pretty much nailed on to raise rates again next week. Higher interest rates make non-yielding assets such as gold relatively less desirable and with futures closing at their lowest level since January last night, Randgold Resources looks vulnerable, especially considering the 20% rise seen in the stock over the past three months.
Trump takes aim at drug companies
Other stocks in the red this morning are Hikma Pharmaceuticals (LON:HIK) and GlaxoSmithKline with shares in both firms off by around 1% following a tweet from Trump yesterday. The US President suggested that he would look to tackle the high prices seen in the drug industry in an announcement that was quite unexpected. Hillary Clinton suggested during her campaign that she would clamp down on the pricing seen for many pharmaceuticals and her loss saw a positive reaction in the sector as investors believed they had dodged a bullet. However, as has been the case for several companies since the election, pharmaceuticals learned last night that just a single tweet can wipe hundreds of millions off their valuation.