Just after midday UK Chancellor of the Exchequer Philip Hammond will unveil his first mini-budget in the Autumn statement. Whilst no major changes are expected, this event is always keenly watched and could have a significant impact on the markets. Heading into the announcement the pound is lower across the board against its major peers and the FTSE is higher by around half a percent.
Difficult balancing act for the Chancellor
Despite an unexpected improvement in the Treasury's finances for the month of October, there remains very little leeway for Chancellor Philip Hammond in his Autumn Statement. In Mr. Hammond's first mini-budget he will try to show that Britain remains open for business after the EU referendum and look to unveil some new measures to appease the public but, with the purse strings remaining tight, the Chancellor will look to pull off a delicate balancing act.
Budgets are notoriously difficult for any Chancellor and due to the state of the fiscal deficit and forthcoming headwinds to the economy from the uncertainty caused by deliberations surrounding the Brexit, Mr. Hammond faces an unenviable task. An extra £100bn of public borrowing over the next five years is forecast to be announced and with national debt already at £1.6trn the Treasury is approaching the limits of what they can offer to support the economy from a spending point of view.
An increase in the national living wage to £7.50 an hour is expected to be announced and is one area that the Treasury will seek to gain some political capital. However, if truth be told this would only represent a 30p increase and whilst it is a positive for low income earners, there remains a long way to go to reach the £9 an hour targeted by predecessor George Osborne by the year 2020.
Gold stocks lead the way higher
The best performing shares on the FTSE 100 this morning are those sensitive to the price of Gold, with Fresnillo (LON:FRES) and Randgold Resources (LON:RRS) both attempting to recoup some of their recent losses. Futures contracts on the precious metal remain languishing near levels not seen since the Brexit vote, and the rising rate environment that has been witnessed around the globe since Trump won the US election threatens to cause more pain ahead for Gold bugs. Banking shares have enjoyed a good run of late but are broadly lower today with the Royal Bank of Scotland (LON:RBS) at the foot of the UK’s leading index and lower by more than 2%.