Shares plummet as cynics struggle to digest Budget

Mickey Clark
22 Apr 2009

The Chancellor of the Exchequer's Budget was cynically seen by some in the City as an old fashioned move to soak the rich in order to dish out more to the poor with an eye on the next General Election.

As a result, the stock market looked set to extend this week's losses with good news proving to be thin on the ground in the face of the worst global recession since the second world war.

As the Chancellor stood to make his speech at 12.31, the FTSE 100 index was nursing a loss of 9.15 at 3978.31. When he sat down 50 minutes later, the deficit in the index had increased to 33.78 at 3953.68, although some of this was attributed to bad news from New York where the market was digesting news of the death of the chief financial officer of homes loans giant Freddie Mac. The Footsie later extended the loss to 35.14 at 3952.32.

The pub chain operators have lost their battle to get the duty on a pint frozen.

The Chancellor will raise the duty on alcohol by 2% as of midnight tonight, the equivalent of a penny on a pint, 13p on a nip and 4p on a bottle of wine. Punch Taverns shaded ¼p to 93¼p, while JD Wetherspoon shed 11¾p to 404¾p, Fuller Smith & Turner 12½p to 475p and Whitbread 6½p to 832p. Diageo, which includes Guinness, Baileys and Johnnie Walker scotch, dipped 5½p to 788p.

The move will go down like a flat pint with the pub operators who have already been battered by the smoking ban, falling beer sales and increased competition from the supermarkets.

At the same time, Numis securities has raised Punch Taverns from hold to add with a 110p target ahead of the pub chain operator's half-year numbers next week. The broker is confident Punch can beat full-year profit expectations by 10% and says its new rating is based on current trading, disposals and share buy backs.

The duty on fags and tobacco will also rise by 2% as of 6pm tonight. That, combined with the rise in booze, should add £6 billion to the Government's coffers by 2012. British American Tobacco slipped 5p to 1568p while Imperial Tobacco was down 25p at 1482p.

Housebuilders warmed to the news that the Chancellor will extend the holiday on stamp duty for homes worth up to £175,000 until the end of the year.

Barratt Developments rose 12p to 161½p, Berkeley Group added 13½p to 965½p, while Bovis Homes firmed 8p to 451p and Persimmon put on 14½p to 394p.

Confirmation of the Government's plans to offer cash sums of up to £2000 for motorists to scrap vehicles more than 10 years old in order to buy new and more fuel-efficient vehicles went down well with the motor traders.

Pendragon accelerated ½p to 16p, as Inchcape put on 1¾p at 17p although Caffyns marked time at 345p. But some of the edge was taken off the move by news of 2p a litre rise in fuel in September and a further 1p rise next year.

A clutch of blue-chip companies going ex-dividend also acted as a drag on sentiment. They included Centrica, down 13p at 233p, Reed Elsevier, off 19p at 480p, Cadbury, 19p cheaper at 495½p, Balfour Beatty, 5¾p lighter at 327¼p, and BAE Systems, 6¼p lower at 333¾p.

And US investment bank JPMorgan reckons that shares of our very own BP, down 2p at 446½p, still look attractive and are trading at a 15% discount to the rest of the sector.

Ever heard the name Zhaikmunai? No? Neither had I. But according to market chit-chat, BP may be looking to buy it. Zhaikmunai is an oil explorer based in Kazakhstan — an area the experts say BP and its Russian partner TNK need to get involved in.

Zhaikmunai has quotes in both New York and London after being floated last year, with a price tag of $1 billion (£684 million), when the oil price was on the way towards a record high of $164 a barrel. The shares were today trading 4 cents higher at $3 where the company is now valued at around $400 million.