LONDON MARKETS: FTSE 100 Jumps After U.K. Budget Plan

By Carla Mozee, MarketWatch

Standard Chartered upgraded; Pound sees 2010 low

LONDON (MarketWatch) -- Stocks climbed in London Wednesday, extending gains after the government laid out its budget, but the pound was hit as comments from the Bank of England underscored expectations that interest rates will be left on hold.

Stocks: The FTSE 100 rose 1.6% at 6,945.20 and the midcap FTSE 250 rose 0.9% to 17,363.74, after Chancellor of the Exchequer George Osborne presented the coalition government's 2015 budget to lawmakers. It is the final budget before the U.K. general election in May.

The budget generally met projections, "with all the giveaways that one might expect to various constituents," said Nick Beecroft, senior market analyst at Saxo Bank.

The chancellor discussed overhauling taxes for the North Sea oil industry, which has been hurt by the slide in oil prices. The measures could add up to GBP1.3 billion in tax reductions. Shares of major oil companies Royal Dutch Shell PLC and BP PLC each bounced up 2.4%, and BG Group PLC turned higher by 1%.

Housing stocks stayed higher, with the "imaginative idea of matching a 25% contribution to whatever people save toward home deposits," Beecroft said. Home builder Taylor Wimpey PLC climbed 2.6%, Barratt Developments PLC rose 1.3% and Persimmon PLC gained 0.9%.

Bank shares largely held to gains after Osborne announced plans to increase an annual bank levy by 0.21%, a move he said will raise GBP900 million to support economic recovery following the financial crisis. HSBC PLC ended up 1.6% and Barclays PLC picked up 0.9%.

Lloyds Banking Group PLC managed to turn 0.1% higher, after slightly extending losses after Osborne said the government will sell more than GBP9 billion shares in the lender this year. The bank is roughly 24% owned by the government, stemming from its bailout in 2007.

Stock in Royal Bank of Scotland also turned higher by 0.3%. Standard Chartered PLC rallied 8.1%, extending gains as the Asia-focused bank started the session with a ratings upgrade to overweight from equal weight at Barclays.

Among the few decliners on the FTSE 100, enterprise-software maker Sage Group PLC and brewer SABMiller PLC each slipped 0.1%. Automobile and aerospace components maker GKN PLC ended fractionally lower.

Osborne outlined plans to tackle tax evasion that would raise GBP5 billion a year, including a 25% tax on profit of some multinational firms detailed in December (http://www.marketwatch.com/story/uk-lays-out-how-google-tax-will-work-2014-12-11).and a "Google Tax" starting April 1.

Osborne also outlined forecasts from the Office for Budget Responsibility (http://www.marketwatch.com/story/uk-budget-forecasts-strike-upbeat-tone-for-economy-2015-03-18), including a 2015 growth forecast of 2.5%, up from 2.4% estimated in December.

Sterling: The pound (GBPUSD) fell to $1.4664 from $1.4749, knocked back to levels last seen in mid-2010. Minutes from the Bank of England's March policy meeting (http://www.marketwatch.com/story/bank-of-england-sounds-alarm-over-stronger-pound-2015-03-18) showed officials are concerned the pound's rise against currencies of the U.K.'s key trading partners will weigh on prices for imported goods, keeping inflation levels lower for longer.

Annual inflation was running at 0.3%, below the bank's 2% target, giving little reason for policy makers to raise the benchmark rate from 0.5%. All nine policy members in March voted to hold the rate steady.

At the same time, January data from the Office for National Statistics released Wednesday (http://www.marketwatch.com/story/uk-employment-improves-but-wages-disappoint-2015-03-18) showed annual wages grew by 1.6% excluding bonuses. Analysts polled by FactSet had expected growth of 1.8%.

"The recent positive run of earnings data has countered the low headline inflation readings, but this lower wage growth is now concerning," wrote Alex Edwards, head of the corporate desk at UKForex, in a note.

Investors will turn to the Federal Reserve's policy statement due after trading closes in the U.K.

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