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LONDON MARKET EARLY CALL: London called lower before spring statement

26th Mar 2025 06:52

(Alliance News) - Stocks in London are set to open lower on Wednesday, ahead of an expected economic growth forecast cut in the UK and Chancellor Rachel Reeves' spring statement.

IG says futures indicate the FTSE 100 to open down 6.2 points, 0.1%, at 8,657.60 on Wednesday. The index of London large-caps closed up 25.79 points, 0.3%, at 8,663.80 on Tuesday.

Sterling was quoted at USD1.2936 early Wednesday, lower than USD1.2955 at the London equities close on Tuesday.

The euro traded at USD1.0785 early Wednesday, lower than USD1.0811 late Tuesday. Against the yen, the dollar was quoted higher at JPY150.52 versus JPY149.73.

"This morning's CPI figures kick things off, with headline inflation set to have held steady at 3.0% YoY last month, though underlying price pressures should ease a touch, with core and services inflation seen at 3.6% YoY and 4.9% YoY respectively. Of course, no PPI figures will be released due to the ongoing shambles down at the ONS. The data, though, shouldn’t have a huge impact on the BoE policy outlook, particularly with another round of price data due before the next MPC meeting," said Pepperstone analyst Michael Brown.

"Of much greater impact will likely be this lunchtime’s 'Spring Statement', where Chancellor Reeves looks set to deliver around GBP15 billion of spending cuts in order to restore the fiscal headroom that a gilt sell-off, and anaemic economic growth, have eroded since the budget last autumn. Said spending cuts will likely come from slashing the benefits bill, as well as spend in unprotected government departments [i.e., those outside of defence and health]. Meanwhile, the year ahead gilt remit should stand at around GBP310 billion, with issuance likely to continue to be front-loaded.

"That said, Reeves will be delivering out-of-date forecasts, with Gilt yields sitting around 20bp higher across the curve than when the OBR took their snapshot at the start of last month. Hence, the key question will be whether market participants believe Reeves’s spending cuts are enough, which seems a particularly tough ask for a Chancellor with next-to-no credibility in the market’s mind. Short gilts, and short Reeves's Cabinet career prospects, are my trades of choice here."

The UK Office for Budget Responsibility, OBR, is widely expected to slash its forecast for economic growth, following similar recent revisions by the Bank of England and the Organisation for Economic Co-operation & Development, OECD.

The watchdog also is said to have warned that cuts to welfare set out in recent weeks have fallen short of the GBP5 billion savings ministers expected, according to media reports, leaving the chancellor with a GBP1.6 billion hole likely to be filled with further cuts.

In her spring statement, the Reeves will tell MPs that a "more insecure world" requires a greater focus on national security, with a promise to increase defence spending by GBP2.2 billion from April as part of the previously announced plan for the biggest boost in military funding since the Cold War.

In the US on Tuesday, Wall Street ended higher, with the Dow Jones Industrial Average up marginally, the S&P 500 up 0.2% and the Nasdaq Composite up 0.5%.

"Dow Jones ended the trading session on March 25 with a slight gain of 0.01%, reflecting investors' cautious sentiment as the market closely monitors developments in tariff policies and geopolitical factors that could influence the overall trend," commented XS.com analyst Linh Tran.

"Dow Jones recorded a nearly 5.6% decline in March but is gradually recovering and approaching the 43,000-point mark. However, the uptrend remains fragile as macroeconomic risks persist.

"This week, high-level trade negotiations between the US and China will be a key market driver, especially as trade tensions escalate and concerns over new tariff policies continue to grow. Investors are closely watching the developments, as any negative signals from Washington or Beijing could pressure the Dow Jones, while positive progress could support the index’s recovery."

The US added dozens of entities to a trade blacklist Tuesday, the Commerce Department said, in part to disrupt Beijing's artificial intelligence and advanced computing capabilities.

The action affects 80 entities from countries including China, the UAE and Iran, with the department citing their "activities contrary to US national security and foreign policy."

Those added to the so-called "entity list" are restricted from obtaining US items and technologies without government authorisation.

In Asia on Wednesday, the Nikkei 225 index in Tokyo was 0.8% higher. In China, the Shanghai Composite was 0.1% higher%, while the Hang Seng index in Hong Kong was up 0.3%. The S&P/ASX 200 in Sydney closed up 0.7%.

Meanwhile, Russia and Ukraine have agreed to halt military strikes in the Black Sea and on energy sites during talks brokered by the US, which offered to ease pressure on agricultural exports as a first concrete incentive to Moscow.

With US President Donald Trump pushing for a rapid end to the war that has killed tens of thousands of people, US negotiators shuttled separately over three days in the Saudi capital Riyadh between delegations from Ukraine and Russia.

In parallel statements, the White House said that each country "agreed to ensure safe navigation, eliminate the use of force and prevent the use of commercial vessels for military purposes in the Black Sea."

Gold was quoted at USD3,025.36 an ounce early Wednesday, up slightly from USD3,023.13 on Tuesday.

Brent oil was trading at USD73.29 a barrel early Wednesday, higher than USD72.71 late Tuesday.

In Wednesday's corporate calendar, full-year results from housebuilder Vistry, bookmaker Evoke and online wine seller Virgin Wines.

In the economic calendar on Wednesday, UK CPI and PPI prints at 0700 GMT, the spring statement at 1230 GMT and US durable goods orders data also at 1230 GMT.

By Emily Parsons, Alliance News reporter

Comments and questions to [email protected]

Copyright 2025 Alliance News Ltd. All Rights Reserved.

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