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Shares in London tumbled today as the City braced itself for one of the grimmest Budgets in years.
The FTSE 100 index was down 111.44 to 3981.36 while the Dow Jones Industrial Average sank 197.93 to 7933.4 in New York. The pound slumped nearly three cents against the dollar to $1.4514.
It came ahead of Wednesday's Budget and results this week from companies such as Tesco in the UK and IBM in the US. Investors were also disappointed by figures from Bank of America.
Henk Potts, markets strategist at Barclays Wealth, said: “We've had six weeks of rallying markets on improved confidence but while the reporting season has been better than expected, the results are still very poor indeed.
“There are still a lot of hurdles to overcome and volatility is still going to be a significant aspect.”
Chancellor Alistair Darling was on a collision course with the City over his forecasts for economic recovery.
He is expected to predict that the UK will pull out of recession by the end of the year. But City analysts are sceptical and warned there will be no meaningful recovery before next spring.
They also warned unemployment numbers due out on the same day will provide a dire backdrop to his speech.
Peter Spencer, chief economic adviser to the Ernst & Young Item Club, said: “We face another 12 to 18 months of serious grief. Around 900,000 jobs will be lost this year and half a million next.”
The Item Club forecast the economy to shrink by 3.5% this year and by 0.1% in 2010. Employers' organisation the CBI predicted contraction of 3.9% this year and a return to growth in the second quarter of next year although it warned any recovery would be “slow and fragile”.
But Darling is likely to be more optimistic, predicting output to decline by 3% this year with recovery expected as soon as Christmas.
The extent of the slump means he will have to borrow as much as £175 billion this year which will seriously limit how much more money the Government can spend to bolster the economy.
CBI director-general Richard Lambert said: “We urge the Chancellor to avoid any further major fiscal boosts. There are tentative signs the steepest phase of the recession is now behind us.”
The Item Club said measures taken to tackle the downturn, such as interest rate and tax cuts, bank bailouts, and increased spending, were working.
Reader views (9)
I see Labour's rating has gone up 9 points since yesterday according to the Guardian's latest poll. LOL
- Val Daniels, Mijas Costa, Spain, 20/04/2009 21:56
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Gordon Brown and Co are a bunch of rats who don't even have the decency to desert the sinking ship!!!!
Mike Kimmins
Bexley, ent
- Mike Kimmins, Bexley, Kent, 20/04/2009 17:06
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It's rather like suddenly finding that Al Capone has been in the White House for three years and they have just got him on tax irregularities.
- Minnie, London, UK, 20/04/2009 15:30
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Will either one be correct-thus far neither has been.
- Harvey Lawrence, London, 20/04/2009 14:09
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The optimistic forecast is a last gasp of spin from these Labour muppets.
They are clearly clueless. Bring on the election.
- Dave Davies, Basingstoke, 20/04/2009 12:32
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I'm an Expat in HK having moved here from LN a year and half ago. I work for an IB (one of the few that did not get into trouble, made a profit and certainly does not need a taxpayers handout).
Life here is good, 16% tax, low crime (barely any), fantastic weather, people - u name it. Yes I do miss England in a lot of ways (inc family) but can only look on in sheer disbelief at what this bunch of arrogant muppets have done to a once proud country.
All I can say is, Good Luck to you all. The sooner you kick them out the better.
Kind regards
- Sarit Shah, Hong Kong, 20/04/2009 11:58
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Sarit, here is a comment from Winston Churchill:
"The British people can face peril or misfortune with fortitude and buoyancy, but they bitterly resent being deceived or finding that those responsible for their affairs are themselves dwelling in a fool's paradise".
- Down With Brown, London, 20/04/2009 11:00
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i was self employed until dec 2008.my savings etc have diminished so i went to sign on for job seekers allowance. guess what? even though my NI contributions are up to date,i get nothing.i was advised not to even sign on.i pushed the issue and was allowed to sign on.but will not get any JSA.WHY? The goverment does not recognise ex unemployed self employed people. even though my contributions are up to date and over the limits.but and here is the rub.should i be an assylum seeker,i get JSA.if im an illegal immigrant awaiting a decision,i get JSA. if im from the east european EC block,i get JSA.BUT IM A BRITISH SUBJECT!!!!!.SO THE UNEMPLOYEMENT FIGURES ARE ALWAYS GOING TO BE WRONG.tax payers money should not be used to help people if they have put nothing into the sysstem and have never lived here.public spending must be reined in.i never thought i would be so blatanly discriminated in my own country.and the outlook is bleak in my profession.so do i believe darling? a big NO.do i believe the CBI no not really.the boys club are always wrong.ive always beleived in being positive.and believed that no matter what country came first.taxes are rising. food and fuel prices have risen.lets not talk about MPS allowances.fiscal policy needs to be controlled,Darlings words are an empty vessel.the country needs to see strong action .with a weak opposition,a compliant labour party things will only get worse.be bold mr darling if not see you at the job centre plus signing on day 2010!
- Mikeee, peterborough uk, 20/04/2009 10:46
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What, no comment from Val, Keith and Wayne?
lol
- Sarit Shah, Hong Kong, 20/04/2009 09:51
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