Budget fears for banks and commodity retreat pulls FTSE lower

The UK’s blue-chip index has opened this morning with an air of caution as investors wait for Chancellor George Osborne’s emergency Budget annoncement. Osborne is expected to confirm a levy on banks to raise £3bn as well as the biggest spending cuts since the Second World War, causing some investor hesitation around banking stocks. Commodity stocks are also out of favour this morning after confidence urged by China’s decision to make the yuan more flexible faded.

Nerves are rife amongst investors this morning as the Chancellor prepares to announce details of what he called the “unavoidable budget”.

Speaking to the BBC at the weekend, Osborne said: “I see it as decisive action to deal with Britain's record budget deficit.

"We sit here as the country in Europe with the largest budget deficit of any major economy, at a time when markets and investors and businesses are looking around the world at countries that can't control their debts. In that sense, it's an unavoidable budget."

The FTSE 100 index has shed over 60 points before 10:30BST as a result, falling over 1.1 per cent as the budget looks to raise concerns across sectors.

Barclays (LON:BARC) has been the hardest suffering banking stock of morning trading, down more than 3.5 per cent, losing 11p.

RBS (LON:RBS) follows closely behind with it dropping to 45.79p with a loss of two per cent. Lloyds Banking Group (LON:LLOY) has also shed one per cent of its price and HSBC (LON:HSBA) is trading 0.4 per cent down.

But it’s not banking stocks that are dominating the highest fallers of the session at the moment. Commodity stocks have posted big drops today, losing much of the ground they gained yesterday after China said it would make its currency more flexible in hope that it would boost the country’s ability to buy imported goods.

Mining and oil stocks scored favourable gains off the back of that news yesterday, but investor scepticism over the extent of the rise grew in this morning’s session and has put shares in the two sectors at the peak of the FTSE 100 fallers chart.

Fresnillo (LON:FRES) is heading the losers at the moment, shedding almost four per cent. And Kazakhmys (LON:KAZ), Eurasian Natural Resources (LON:ENRC), Xstrata (LON:XTA) and Vedanta Resources (LON:VED) are all in decline of over three per cent making it a difficult day for miners.

BG Group (LON:BG) heads the oil sector losses with a drop of 42p and 3.7 per cent after Goldman Sachs downgraded its rating from ‘buy’ to ‘neutral’. Cain Energy (LON:CNE) and BP (LON:BP) are also down 3.4 and three per cent respectively.

The exceptional gaining shares of the day – one of just four FTSE 100 stocks in the green at the moment – is hotel and restaurant operator Whitbread (LON:WTB). The Group has posted strong first quarter results, pushing its share price up 38p or 2.6 per cent.

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