UK budget cold comfort for sterling, boosts building firms | Reuters
By Patrick Graham | LONDON LONDON Britain's 2017 budget gave some meagre support on Wednesday to domestic stock and currency markets suffering from nerves over its plans to leave the European Union and the fallout for increasingly hard-pressed consumers.While finance minister Philip Hammond announced a rise in official growth forecasts for this year and cut predicted rates of public debt from November estimates, it was not enough to turn either the pound or the FTSE index positive on the day. Britain's construction & materials index hit a high for the day, up 0.3 percent, and shares in Costain Group rose 0.8 percent.But hampered by a bumper U.S
By Patrick Graham
LONDON Britain's 2017 budget gave some meagre support on Wednesday to domestic stock and currency markets suffering from nerves over its plans to leave the European Union and the fallout for increasingly hard-pressed consumers.While finance minister Philip Hammond announced a rise in official growth forecasts for this year and cut predicted rates of public debt from November estimates, it was not enough to turn either the pound or the FTSE index positive on the day. Britain's construction & materials index hit a high for the day, up 0.3 percent, and shares in Costain Group rose 0.8 percent.But hampered by a bumper U.S. jobs number that boosted the dollar, the pound fell half a percent on the day against the greenback, hitting a seven-week low of $1.2139, and another 0.2 percent against the euro. "Chancellor Hammond’s budget has done little to ease the pressure on the pound, despite the improvements in growth and borrowing forecasts," said Jake Trask, a currency analyst with retail broker OFX.Strong consumer spending made Britain the second-fastest growing economy in the Group of Seven rich nations in 2016 and Hammond raised his forecast for growth this year to 2.0 percent from the 1.4 percent predicted last November.
But markets are more concerned by signs that the 20 percent fall in the pound and worries over what is to come as the Brexit talks that get under way this month are finally having an impact on UK household spending.Sterling's fall against the dollar and the basket that measures its broader strength was its eighth in the past nine days. "There’s been some optimism over the upward revision to growth this year, and the lower budget deficit forecasts over the period is obviously favourable for the fundamental picture," said Lee Hardman, an economist with MUFG in London.
"But overall the main message is yes, that the budget deficit is coming in below their previous forecasts, but they’re choosing to save the improvement in the budget deficit rather than to spend those funds, so for the economy that’s fairly neutral."Gilt yields hit a two-week high after official plans showed the government would sell more bonds than the market had expected, despite Hammond largely sticking to his existing fiscal plans.The Debt Management Office (DMO) said it intended to sell 115.1 billion pounds ($139.9 billion) of bonds in the 2017/18 financial year starting in April, down sharply from 146.5 billion pounds in the current year.
That was still 5 billion pounds more for 2017/18 than primary dealers polled by Reuters had expected and 10-year gilt yields hit a two-week high of 1.251 percent."Market reaction was consistent with a mild disappointment," said RBC analysts Sam Hill and Vatsala Datta in a note after the budget. "Going forward, we believe it is worth bearing in mind that a combination of 30 billion pound fall in gross issuance and a 10 billion pound increase in gilt redemptions will offset the impact of pause in QE to a large extent." (Additional reporting by Andy Bruce, Helen Reid, Jemima Kelly and Ritvik Carvalho; Editing by Nigel Stephenson, Alison Williams and Pritha Sarkar)
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By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States
BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.