British markets take Healey's first budget in their stride

Lloyds Banking

Wed 13:43

LONDON, Oct 28 (Reuters) - Britain's stocks, bonds and currency barely reacted to finance minister John Healey's first budget on Wednesday, in which he pledged to stick to fiscal rules, while accepting a smaller fiscal cushion due to rising energy prices and borrowing costs.
Healey said the headroom - the amount of extra spending or tax cuts possible the government can make under its own fiscal rules - stood at £15 billion ($19.93 billion), in line with expectations from a Reuters poll, but below the £23.6 billion in March. 
Britain's 10-year government bond yield GB10YT=RR was down 2 basis points on the day at 5.323%, while the 30-year yield GB30YT=RR was down 3 bps at 5.711%, as prices rose.
"It was meant to be a steady as you go budget. The bond market is calling it a very boring budget - yields a couple of basis points lower at the long end and virtually unchanged elsewhere. So nothing that's going to change the fiscal picture for the UK significantly," Kathleen Brooks, research director at XTB, said.
"Even though we're borrowing more nominally, it's not having an impact on markets and it's not a worry for investors. The reason why is because the government is capitalising on the better growth forecasts," she said.
The pound was down 0.1% against the dollar GBP= to $1.3298 after earlier hitting a 1-1/2 week low. Sterling was down 0.1% against the euro  EURGBP= at 83.72 pence.  
The blue-chip FTSE 100 index .FTSE was up 0.1%, broadly in line with gains in other major European stock markets. The FTSE 250 .FTMC, which generates a greater proportion of its revenue domestically, was up 0.4%.
Britain's biggest lenders welcomed a smaller-than-feared tax hike on their profits. The banking tax hike comes via an increase on the surcharge banks pay on profits above a set threshold from 3% to 6%, partially reversing a cut from 8% three years ago under then-Conservative Prime Minister Rishi Sunak. 
Shares in Lloyds LLOY.L, Barclays BARC.L and NatWest NWG.L were up between 3.3% and 3.6%. 
($1 = 0.7527 pounds)

(Reporting by Samuel Indyk and Johann Cherian; Editing by Amanda Cooper)
((Samuel.Indyk@thomsonreuters.com))