Darling's PBR Boosts UK Markets
Pound Sterling - UK Markets
The Pound gained 2 cents on the US Dollar and UK shares gained more than 10% following Darling's announcement. Although having slipped back 0.43% in early trading against the Dollar, Sterling is currently in the region of $1.51. The Pound has declined slightly this morning against the Euro and results are mixed against other major currency partners.
The Pre Budget Report confirmed much of the media speculation, including reduction of VAT to 15% for the next 13 months and an increase in the top tax rate, for those earning over £150 000, to 45%. Also detailed in the plan was £1 billion made available to help small businesses, an increase in public spending and help for workers made redundant. Darling also revised 2009 growth forecasts to a contraction of between -0.75 and -1.25% with a 1.5-2% increase forecast for 2010.
Major criticisms of the report come from soaring government debt figures, which is set to grow to £118 billion next year. While slashing taxes now to encourage spending and stave of recession, the government is also borrowing at record rates and facing less income in the form of taxes to fund it. Darling cited the ‘exceptional circumstances' making excessive borrowing the only option for government at present, and maintained the UK is in a relatively strong position to weather the global recession.
US Dollar - US Dollar
The US Dollar has recovered against the Euro and Pound this morning, trading at around 0.77 and 0.66 respectively.
Personal consumption expenditure and consumer confidence are released in the US today which should give markets an indication of consumer confidence in the lead up to Christmas. There are growing expectations that the Federal Reserve will reduce interest rates to 0.5% from the current 1% when they meet on December 16. Personal Income and Spending data is due in the US tomorrow.
Euro - European Markets
Figures released from the Eurozone this morning show German GDP has contracted by 0.5% from July to September. Foreign trade and exports have been a drag on GDP as recession reduces global demand. The Euro is lower against the US Dollar this morning but has made slight gains on the Pound.
There is no major data from the Eurozone for the rest of the day with the German Consumer Price Index due out tomorrow.