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Budget 2012: pound pares losses and gilts gain
by Max Julius on Mar 21, 2012 at 13:04
Sterling pared losses versus the dollar and gilts gained on Wednesday, as chancellor George Osborne modestly revised up forecasts for UK growth and reaffirmed the government’s ‘unwavering commitment’ to cut Britain’s budget deficit.
Osborne said the Office of Budget Responsibility (OBR), the government’s fiscal watchdog, now estimates Britain to grow 0.8% this year, in line with market expectations, up from its forecast of 0.7% last autumn.
Britain will grow 2% next year, down from 2.1% a year earlier, he said, noting that the office’s outlook on the UK economy was broadly unchanged. The OBR also forecast growth of 2.7% in 2014 and 3% in both 2015 and 2016, he said.
Sterling edged down 0.06% versus the dollar to $1.585, up from a day low of $1.582, as the yield – or implied interest rate – on benchmark 10-year government gilts dropped eight basis points to 2.37%.
The FTSE 100 index of blue-chip shares eased 0.01%, or half a point, to 5,892, and the FTSE All Share index added 0.04%, or one point, to 3,061.
Banks edged down after Osborne said the government would raise its bank levy for a fourth time, although the falls were in line with their rivals elsewhere in Europe.
Sainsbury (SBRY.L) was the top gainer on the index, hardening 14p to 319p, on the back of a stronger-than-expected trading statement for the fourth quarter.
Pumps manufacturer Weir Group (WEIR.L) was the biggest loser, sinking 123p to £18.59, in the wake of a profit warning by Baker Hughes, the US oil services group.
On the FTSE 250, housebuilders climbed as Osborne said there would be extra funding to pay for new homes in Britain. Bovis Homes (BVS.L) added 22p to 514p and Barratt Developments (BDEV.L) took on 6p to 149p.
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