Morning Deal: Pride and prudence expected in UK budget

A next-day look at Ankur Banerjee’s European and global markets

The relief rally in the market will be tested when British Chancellor Jeremy Hunt presents the UK’s spring budget as he tries to speed the sixth largest economy in the world, with business lobbies clamoring for sweeteners.

Hunt, who was recruited last year after former Prime Minister Liz Truss’s mini-budget rocked UK markets in September, will speak at 12:30 GMT and is expected to steer clear of big tax cuts or spending increases.

That may sour investors’ risk appetite after the relief rally was helped on Wednesday by economic activity data from China that showed a gradual but uneven recovery. Rising expectations that the Fed will not return to giant hikes after Tuesday’s inflation data also helped boost sentiment.

The market is now pricing in about a 80% chance of a 25bp rise, compared to last week when it priced a 70% chance of a 50bp rise. Some in the market still expect the Fed to hold rates. Retail sales data later will shed more light on the state of the economy.

European stocks may find it difficult to sustain the rally as futures indicate the market should open slightly higher.

Bank stocks recouped some of their heavy losses as traders bet (or hoped) that the worst of the SVB fallout was over as contagion fears gripping the market subsided.

In the business world, attention will be focused on Credit Suisse after the Swiss bank said it had identified “material weaknesses” on internal controls over financial reporting.

Meanwhile, Meta Platforms, the parent company of Facebook, announced that cut 10,000 jobs this year, becoming the first big tech company to announce a second round of mass layoffs.

Key developments that could influence markets on Wednesday:

Economic events: Inflation data from Sweden and France

eurozone industrial production data; UK budget

Reporting by Ankur Banerjee; Edited by Muralikumar Anantharaman

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