London open: FTSE gains, sterling dips after UK borrowing figures

(Sharecast News) - London stocks edged higher in early trade on Tuesday, taking their cue from a positive close on Wall Street, while sterling dipped after the latest UK borrowing figures.

At 0830 BST, the FTSE 100 was up 0.2% at 9,425.38, while the pound was down 0.2% against the dollar at 1.3383 after data from the Office for National Statistics showed that public sector borrowing in September hit its highest level for the month in five years.

Borrowing came in at �20.2bn, up �1.6bn or 8.6% on the same month a year earlier and the highest for September since 2020.

Borrowing in the financial year to September was �99.8bn, up �11.5bn on the same period a year earlier and the second-highest April to September borrowing since monthly records began in 1993.

ONS chief economist Grant Fitzner said: "Last month saw the highest September borrowing for five years.

"Debt interest, the cost of providing public services and benefits all increased compared with last year, more than offsetting the rise in receipts from central government taxes and National Insurance contributions.

"Likewise, the first six months of the financial year saw the highest overall deficit since 2020."

Nabil Taleb, economist at PwC UK, said: "Debt interest payments reached �9.7bn in September, �3.9bn more than a year ago. The interest payable on central government debt was higher than any previous September on record. Higher debt servicing costs as a share of total revenues will leave the public finances more exposed to future economic shocks.

"The Chancellor faces an increasingly difficult balancing act ahead of the Autumn Budget, with her fiscal headroom all but exhausted by a mix of weaker growth prospects, higher borrowing costs and rising spending pressures. An expected downgrade to the OBR's long-term growth forecasts will only add to the squeeze. Despite ruling out another �40 billion tax grab, fresh tax rises and spending cuts now look unavoidable as she tries to rebuild her �10 billion buffer. The IFS estimates she'll need to find around �22 billion to do so.

"A confident Budget may steady markets and lift consumer sentiment, but the UK's real challenge is raising productivity. The IMF expects the UK to be the second-fastest growing G7 economy this year, yet much of that growth comes from higher labour participation rather than genuine productivity gains. Until the UK starts adding more value, weak per-capita growth and mounting fiscal pressures will continue to persist."

In equity markets, Segro shot to the top of the FTSE 100 as it hailed a strong third quarter, with �22m of new rent signed.

On the downside, Coca-Cola HBC slumped as it said it was ramping up its presence in Africa after agreeing to acquire one of the brand's biggest bottling partners in a $2.6bn deal. The firm will buy a 75% stake in Coca-Cola Beverages Africa (CCBA) for $2.6bn, valuing the Johannesburg-based business a value at $3.4bn.

The deal will create the second-largest Coca-Cola bottling partner by volume globally, with leading positions across Africa and Europe, CCH said.

Elsewhere, consumer goods giant Unilever also fell after saying it had been forced to revise the timetable for its planned ice-cream unit demerger due to the ongoing US federal government shutdown which is stalling a legal registration needed to list its shares in New York.

The company said preparatory work for the demerger of the Magnum Ice Cream Company is "on track and progressing well", adding that it was "committed to and confident" of implementing the plan this year.

Market Movers

FTSE 100 (UKX) 9,425.38 0.23%

FTSE 250 (MCX) 21,893.42 0.11%

techMARK (TASX) 5,509.44 -0.07%

FTSE 100 - Risers

SEGRO (SGRO) 688.40p 2.35%

Metlen Energy & Metals (MTLN) 41.58p 1.90%

Fresnillo (FRES) 2,452.00p 1.83%

HSBC Holdings (HSBA) 986.00p 1.67%

Smurfit Westrock (DI) (SWR) 3,163.00p 1.35%

Babcock International Group (BAB) 1,180.00p 1.11%

Standard Chartered (STAN) 1,404.00p 1.01%

Barclays (BARC) 365.35p 0.98%

Relx plc (REL) 3,438.00p 0.97%

Pearson (PSON) 1,099.00p 0.96%

FTSE 100 - Fallers

Coca-Cola HBC AG (CDI) (CCH) 3,444.00p -2.66%

AstraZeneca (AZN) 12,452.00p -0.89%

Unilever (ULVR) 4,619.00p -0.86%

Croda International (CRDA) 2,852.00p -0.66%

Burberry Group (BRBY) 1,226.00p -0.61%

Mondi (MNDI) 819.20p -0.61%

Entain (ENT) 807.20p -0.59%

WPP (WPP) 345.60p -0.58%

Antofagasta (ANTO) 2,684.00p -0.48%

Barratt Redrow (BTRW) 379.80p -0.47%

FTSE 250 - Risers

Mitchells & Butlers (MAB) 251.00p 2.24%

SSP Group (SSPG) 164.00p 2.12%

IP Group (IPO) 58.00p 1.93%

Workspace Group (WKP) 402.00p 1.90%

Vietnam Enterprise Investments (DI) (VEIL) 754.00p 1.48%

Fidelity China Special Situations (FCSS) 315.00p 1.45%

VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 459.00p 1.44%

ITV (ITV) 75.45p 1.14%

RHI Magnesita N.V. (DI) (RHIM) 2,035.00p 0.99%

TBC Bank Group (TBCG) 4,150.00p 0.97%

FTSE 250 - Fallers

Bluefield Solar Income Fund Limited (BSIF) 80.00p -3.96%

W.A.G Payment Solutions (EWG) 88.20p -2.43%

Aston Martin Lagonda Global Holdings (AML) 62.30p -2.35%

Vesuvius (VSVS) 352.20p -2.28%

Me Group International (MEGP) 181.00p -1.74%

Grafton Group Ut (CDI) (GFTU) 895.00p -1.69%

WH Smith (SMWH) 640.50p -1.23%

Schroder Asia Pacific Fund (SDP) 652.00p -1.21%

JPMorgan Japanese Inv Trust (JFJ) 700.00p -1.13%

Morgan Sindall Group (MGNS) 4,725.00p -1.05%