The Budget So Boring, Markets Loved It

The Budget So Boring, Markets Loved It

Every so often a Chancellor stands up, delivers a Budget, and the markets barely look up from their coffee. On Wednesday, John Healey managed exactly that, and frankly, it was the best result he could have hoped for.

After a bruising few months for UK government bonds, the City wasn’t asking for fireworks. It wanted a sensible, grown up Budget with no surprises hiding in the small print. Healey delivered. Gilt yields drifted lower, the 10 year settling around 5.30%, and the pound sat at roughly $1.33 like nothing had happened. One strategist called it the boring Budget bond markets demanded, which in this job counts as a rave review.

Banks: taxed, and thrilled about it

Here’s the strange bit. Banks were told they’ll pay more tax, with the bank surcharge doubling from 3% to 6% for 15 months, and their shares jumped about 4%. Why? Because the rumour mill had been whispering 8%, and that fear had already knocked Lloyds, Barclays and NatWest down by as much as 11% this month. When the bad news turns out to be less bad than expected, markets throw a party. It’s one of the most useful lessons in trading: prices move on expectations, not headlines.

Bookies win the bet

Gambling companies played the same hand. Machine gaming duty rises from 20% to 25%, which sounds painful until you realise the industry had braced for worse. Entain jumped around 6% and Rank shot up 11%. The house, it turns out, still wins.

Housebuilders: a sugar rush

A new £4.7bn scheme to help first time buyers sent housebuilders like Vistry, Barratt and Berkeley higher while Healey was still speaking. The excitement faded by the close, though, because what really drives this sector is mortgage rates, and those follow gilt yields, not speeches.

The catch

Before anyone gets too comfortable, the government’s financial safety cushion has shrunk from £23.6bn to £15bn, and growth next year is forecast at a modest 1%. Inflation also crept up to 3.5% in September. Meanwhile the FTSE 100 ended slightly higher thanks to its global giants, while the more UK focused FTSE 250 slipped about 0.3%, a quiet sign that domestic confidence is still shaky.

The takeaway

The Budget passed its test by not failing it. But the next big moves in UK markets are likely to come from inflation figures and the Bank of England, not the Treasury. Healey has bought himself some breathing room. Whether it lasts is another story.