High borrowing figures hold FTSE back
Profit-takers were in control of the London market today after new data revealed public sector borrowing in September was twice as high as expected.
The shock news prevented top-flight shares from being boosted by the continued caution of the Bank of England’s monetary policy committee (MPC) to raising interest rates.
It meant the FTSE 100 Index was unable to recoup any of its early losses and kept it 37.9 points lower at 4617.3 by mid-morning.
Analysts said the revelation that the public sector was now running a £4.8bn (€6.9bn) deficit created uncertainty about the future tax and expenditure plans of the Government.
This was weighing heavily on the minds of the investors even though a further rise in interest rates was unlikely after it emerged that the MPC voted unanimously to keep rates at 4.75% earlier this month.
For the second session running, insurer Prudential topped the Footsie fallers board as the City continued to react to the company’s plans for a £1bn (€1.4bn) rights issue.
The slump of 7% yesterday was primarily due to the impact of the move on the existing shareholder base, although another drop of 7% came today – down 28p to 394p – as brokers scaled back their recommendations on the stock.
Elsewhere in the insurance sector Norwich Union owner Aviva fell 9p to 531p and Legal & General slipped 2p to 99.5p.
One of the few bright spots of the session came from brewer Scottish & Newcastle after it shrugged off the poor summer weather and fears of a post Euro 2004 hangover to issue a positive update on sales. Shares rose more than 3% in a weak market, up 12.5p to 395.5p.
Outside the top flight, housebuilder Taylor Woodrow fell 14p to 229.5p after warning that annual sales in the UK would be 6% lower than hoped.
