London stocks moved higher on Wednesday afternoon as Chancellor John Healey delivered his first UK Budget, with government bond yields easing and sterling remaining relatively stable, while Wall Street opened positively ahead of major technology earnings and the Federal Reserve’s interest rate decision.
The FTSE 100 was trading 0.2% higher at 10,708.01 at 2.49 pm GMT, recovering from earlier weakness as investors assessed the Government’s fiscal plans and their implications for borrowing, economic growth and household finances.
The FTSE 250 also advanced 0.13% to 24,748, reflecting a cautious but positive response across UK equities.
Chancellor John Healey announced a £15 billion fiscal headroom figure, broadly matching expectations from a Reuters poll but below the £23.6 billion available at the Government’s previous fiscal assessment in March.
Fiscal headroom represents the amount of flexibility remaining before the Government would breach its self-imposed borrowing and debt rules.
The reduced margin highlights the pressure facing public finances as elevated borrowing costs, persistent inflation and economic uncertainty restrict the Government’s ability to increase spending or reduce taxes.
The Budget was presented against the challenge of maintaining investor confidence in UK government debt, particularly after recent volatility in gilt markets and rising long-term borrowing costs.
Prime Minister Andy Burnham’s Government is seeking to balance investment commitments and support for households with the need to demonstrate fiscal discipline.
UK government bond yields eased following the announcement, suggesting an initially measured response from fixed-income investors.
The 10-year gilt yield fell two basis points to 5.323%, while the 30-year yield declined three basis points to 5.711%, reflecting modest gains in bond prices.
Sterling also remained relatively stable despite earlier weakness.
The pound traded 0.1% lower at $1.3298 against the US dollar, having previously touched a one-and-a-half-week low.
Against the euro, sterling weakened by approximately 0.1%, with the euro trading at 83.72 pence.
The limited reaction across currency and bond markets indicated that the headline fiscal figures had not triggered an immediate sharp repricing of UK assets.
Across the Atlantic, Wall Street opened higher as semiconductor and artificial intelligence-related stocks attracted renewed buying interest, supported by strong earnings from South Korean memory-chip manufacturer SK Hynix.
The S&P 500 gained 0.17% to 7,735.56 shortly after the opening bell, while the technology-heavy Nasdaq Composite advanced 0.24% to 26,541.61.
The Dow Jones Industrial Average initially slipped 0.08% to 52,335.43, before recovering during the opening minutes of trading.
Vertiv was among the standout performers, surging 13.56% to $236.85 after reporting a 61% increase in quarterly revenue and raising its full-year sales outlook.
The data centre infrastructure specialist benefited from continued investment in artificial intelligence computing facilities, where growing demand for electricity, cooling and power management equipment is supporting business expansion.
Vertiv’s results provided further evidence of the substantial infrastructure spending associated with the development and deployment of AI systems.
Alphabet shares rose 1.04% to $323.91 ahead of the Google parent’s quarterly results, scheduled for release after the US market closes.
Investors are particularly focused on growth within Google Cloud and whether the company’s substantial investment in artificial intelligence is translating into stronger revenues and profitability.
Microsoft shares were little changed, edging 0.08% higher to $531.73, as markets awaited its latest financial results.
Attention is expected to focus on the performance of Microsoft’s Azure cloud business, AI-related capital expenditure and the balance between infrastructure investment and operating margins.
The contrasting share price movements highlight growing investor scrutiny of technology companies’ ability to generate returns from their expanding AI commitments.
The Federal Reserve’s interest rate decision later on Wednesday represents another important catalyst for global financial markets, with investors awaiting guidance on the direction of US monetary policy.
The announcement could influence expectations for borrowing costs, government bond yields, the dollar and equity valuations, particularly among technology companies sensitive to interest rate changes.
For UK investors, the initial response to the Budget has been relatively restrained, with modest gains in equities, lower gilt yields and limited currency volatility.
However, the reduced £15 billion fiscal headroom leaves the Government with a narrower margin to absorb future economic shocks or changes in borrowing costs.
Attention will now turn to the detailed Budget measures, the Federal Reserve’s policy announcement and earnings from Alphabet and Microsoft, as investors assess whether government spending plans and continued AI investment can support financial markets through the remainder of the week.
