Autumn Statement  

Markets unmoved by Autumn Statement

Markets unmoved by Autumn Statement
Traders at Peel Hunt watch a live broadcast of the Autumn Statement (Hollie Adams/Bloomberg)

Markets were largely unmoved by today's Autumn Statement, with both the FTSE 100 and the pound barely reacting, but investors have warned that the government may have "overcorrected" from the debacle of the "mini" Budget.

The reaction was in stark contrast to the "mini" Budget fallout in September, which saw sterling plummet and bond yields rise - movements which ultimately led to the sacking of former chancellor Kwasi Kwarteng.

Following the Autumn Statement, delivered this morning by Kwarteng's replacement as chancellor Jeremy Hunt, the FTSE 100 was down by 0.69 per cent today - though most of that fall came before his speech.

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Meanwhile the pound is down 0.86 per cent against the dollar, but it has been broadly flat since the Autumn Statement concluded.

The yield on a 10-year gilt is up today by 1.18 per cent.

Luke Bartholomew, senior economist at Abrdn, said: "Having learnt the hard way the risks of shocking financial markets, the government’s fiscal announcements today were all largely as leaked and so expected. As such there likely to be a very limited market reaction.

"That doesn’t, however, make them any less economically painful. The economy is heading for a deep recession, with tighter fiscal policy adding yet another headwind to growth."

During his speech Hunt made a point of reassuring markets, for example by praising the work of the Bank of England since independence and insisting he had no plans to change its mandate.

Daniele Antonucci, chief economist and macro strategist at Quintet Private Bank, said Hunt's fiscal rules on debt falling as a proportion of GDP at the end of a five-year rolling period should help ensure the sustainability of the public finances over time.

But he said: "The bad news is that the belt-tightening is such that GDP growth is now forecast to shrink by 1.4 per cent next year, quite a change from a predicted growth rate of 1.8 per cent in March."

Marcus Brookes, chief investment officer at Quilter Investors, said: "Markets originally reacted well to the steady hand of Jeremy Hunt. They will continue to give him the benefit of the doubt and see the impact of this plan, however, there is also a chance that they see this as an overcorrection and that the measures could stifle what economic growth was present."

damian.fantato@ft.com