UK Gets National Budget – Major EU Members Release GDP Figures

UK investors examine first Labour party budget in 15 years, while main EU economies print mixed flash GDP data

The FTSE opened on mixed trading today after Reeves, the chancellor of the exchequer, released the government’s budget. Reeves said that it was up to the Labour Party and the Labour government to rebuild Britian again.

Part of the reconstruction plan involves higher taxes, from corporate and income taxes to national insurance tax on workers. The bill will also include greater protection for workers and a higher minimum wage.

Concerns mount as to whether the UK can maintain its status as a hub for start-ups and undermine Labour’s promise to turn Britain into the fastest-growing G7 economy. Government sources have said that the chancellor plans around £40 billion ($52 billion) in fiscal measures, most of which will come from tax hikes.

Higher taxation is likely to put strain on the economy. However, Reeves has stated in the past that the only way to accomplish growth is to invest. The budget is likely to include a relaxation of the government fiscal rules.

The new rules would allow the government to spend around an extra £53 billion ($69 billion). The extra spending would have to be financed through bond issuance. We can expect gilt yields to rise and put further pressure on stock prices.

EU Economies

France, Italy, and Germany all released Flash GDP for Q3 2024. All 3 economies saw expansion over Q3 2024, while forecasts for Germany showed a positive surprise.

Both France and Italy see GDP Q3 2024 expanding by 0.4%, slightly higher than expected for France, but lower than expected for Italy. Europe’s powerhouse was expected to see a contraction of 0.1% for Q3 2024.

Instead, the preliminary reading forecasts GDP YoY Q3 expanded by 0.2%, thus avoiding Germany’s economy falling into a recession. If the data is confirmed next month, quarterly data will avoid the back-to-back contractions that define recession.

Despite the positive economic outlook all indices have opened in the red this morning. The DAX is down 0.65%, the CAC down 1.04% and the MIB-FTSE is down 0.70% on the day.