The FTSE 100 broke the 7,000 mark for the first time on firday as talks to keep Greece in the Euro progressed well and the US Federal Reserve indicated that credit prices may remain at historically low levels for some time yet. Elsewhere in Europe, the DAX Index reached record levels and exceeded 12,000.
UK public finances improved in February as higher tax receipts lessened the need for government borrowing. Self assessed tax receipts were more than £2.4 billion higher than last February and new borrowing dropped by £3.5 billion to £6.9 billion. This means that the Government looks to be on course to meet it’s borrowing targets for 2015, despite failing to eliminate the deficit. with one month of this fiscal year still to go, borrowing looks set to come in at about £89bn, nearly £10bn lower than last year and a touch below the OBR’s forecast of £90.2bn in the Budget.
In what may potentially be his final Budget Chancellor George Osborne delivered a generally well received set of tax changes and a raft of boosts for investors. Highlights of the speech included a further relaxation of pension rules from April next year, which will allow up to five million pensioners to swap their fixed annual annuity payments for cash. A new “Help to Buy” ISA will see the government top up the savings of first time buyers by £50 for every £200 saved, up to a maximum bonus of £3,000. Osborne revealed £1.3 billion in tax cuts to boost North Sea oil exploration and a raising of the bank levy to 0.21% to bring in an estimated £900 million per annum.
The Chancellor did not have a great deal to give away but as has come to be a feature of an Osborne Budget he uses any advantage carefully. Generally he balanced the giveaways and taking from banks is an easy win. Helping first time buyers is positive but through an ISA may be a complicated way to do it.
Gold prices hit two-week highs on Friday and were poised for their biggest weekly jump since mid-January, after the U.S. Federal Reserve’s cautious note on interest rates arrested a dollar rally and sparked broad-based buying of commodities.
The U.S. currency fell as much as 1.8 percent against a basket of major currencies on Friday, after the Fed downgraded its growth and inflation projections earlier in the week, signalling it is in no rush to push borrowing costs to more normal levels.
Spot gold has risen over 2 percent this week, recovering from a four-month low touched on Tuesday under pressure from expectations that the U.S. central bank is on track for its first interest rate increase in nearly a decade.
Such a move would boost the dollar and lift the opportunity cost of holding non-yielding bullion. The Fed, however, indicated it preferred a more gradual path.