Pubs, bookies and builders drive budget bounce for UK mid-caps (updated)

Marstons

30/10/2024 15:37

* 
      Mid-cap stocks outperformed blue-chip index despite new
tax
rises
    

        * 
      Small cap stocks saw a significant boost, led by AIM index
    

        * 
      Banks, homebuilders, betting companies, and pubs benefited
from
budget measures
    

  
 (Updates with comments, budget details; refreshes prices at
1522 GMT)
    By Lucy Raitano
       LONDON, Oct 30 (Reuters) - UK mid cap stocks enjoyed a
lift on Wednesday as market players deemed the new Labour
government's first UK budget to be less punitive on businesses
than many had previously feared.
    Mid-cap stocks outperformed the blue-chip index, even as UK
finance minister Rachel Reeves announced a raft of new tax rises
to the tune of 40 billion pounds a year, which would mostly
affect businesses. 
    "UK Chancellor Rachel Reeves has delivered a tough but fair
budget, much of which was already expected as it had been leaked
to the market," said Adrian Gosden, UK equities and fund manager
at Jupiter Asset Management in London.
    "The UK is open for business."
    Domestically-focussed stocks led a charge higher, with
shares of pubs, homebuilders and gambling platforms the biggest
beneficiaries.
    At 1507 GMT, the mid-cap FTSE 250  .FTMC  index was up 0.4%
having risen as much as 1.7% during the budget, while the FTSE
100  .FTSE  was last down 0.5%, barely changed from the day's
open.
    Small cap stocks got an even bigger boost. The FTSE AIM
index  .FTAI  rose by nearly 4%, on course for its biggest
one-day rally since April 2020, after the government cut
business property relief on AIM-listed shares to 50%, rather
than scrapping it altogether as investors had feared. 
    "AIM shares have been depressed for some time, partly due to
the inflation and monetary policy backdrop, as well as the build
up to this budget. But with this hurdle now mostly cleared, and
interest rates beginning to fall, there is a clear runway for
growth for these smaller companies," said Amisha Chohan, head of
small cap strategy at Quilter Cheviot.
    Eustace Santa Barbara, who co-manages the IFSL Marlborough
Special Situations, UK Micro-Cap Growth and Nano-Cap Growth
funds, said with this uncertainty out of the way, the outlook
for small caps looked more positive.
    "This might not be the catalyst for a dramatic turnaround in
investor sentiment on UK smaller companies, but we see it as a
step in the right direction," he said.
    "The most likely policy boost for this market was always
going to be monetary rather than fiscal, and further rate cuts
should deliver that in due course," he said.
    Britain's banks rose as the budget avoided a levy on their
profits, with a basket of UK banks  .FTNMX301010  turning
positive. 
    A basket of UK homebuilder stocks  .FTNMX402020  surged as
much as 3.7% and was last up 2% after Reeves pledged over five
billion pounds ($6.48 bln) of housing investment. Crest
Nicholson  CRST.L , Persimmon  PSN.L  and Taylor Wimpey rose
between 2.2%-4.8%.
    Betting companies including Ladbrokes-owner Entain  ENT.L 
and Flutter Entertainment  FLUT.K  rose to the top of the FTSE
350, up 6.5%-7.6% after Reeves left taxes on the sector
unchanged. 
    Pub stocks also enjoyed a lift after Reeves announced a cut
to duties on alcoholic drinks in pubs, and extended England's
business rates relief for retail and hospitality. Wetherspoons
 JDW.L , Marstons  MARS.L  and Mitchells & Butlers  MAB.L  were
last up 2.4%-5.4%.
    Elsewhere, a basket of UK utilities names  .FTUB6510  ticked
higher, up as much as 1.4%.
    Clean energy tech company Ceres Power  CWR.L  shares rose
4.9%, with the budget including an announcement for eleven new
green hydrogen projects. 
    Oil and gas companies Hunting  HTG.L  and Harbour Energy
 HBR.L  were up 2.6%-4.3%.

 (Additional reporting by Samuel Indyk; Editing by Amanda Cooper
and William Maclean)
 ((mailto:Lucy.Raitano@thomsonreuters.com;))