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Wall Street flat as earnings roll while FTSE closes in red

FTSE  Photo by: NDZ/STAR MAX/IPx 2023 1/18/23 People walk by New York Stock Exchange (NYSE) on January 18, 2023 in new York City.
Wall Street and FTSE 100 both struggled for secure gains this session. Photo: PA/Alamy

The FTSE 100 and European stocks finished mixed this Tuesday as markets reacted to a rise in UK borrowing figures driven by energy support and rising debt payments linked to inflation.

The FTSE 100 (^FTSE) lost 0.23% to close at 7,767 points, while the CAC 40 (^FCHI) in Paris gained 0.18% to 7,044 points. In Germany, the DAX (^GDAXI) finished flat at 15,091.

Across the pond, stocks were flat amid struggling tech stocks as corporate reports continued to roll in.

The Dow Jones (^DJI) was flat at 33,631 points. The S&P 500 (^GSPC) was also muted at 4,016 points and the tech-heavy NASDAQ (^IXIC) was treading water at 11,360.

Back in London, the UK blue-chip index struggled after the latest data showed government borrowing reached £27.4bn ($33.8bn) last month, jumping by £16.7bn against the same month a year earlier due to £7bn in costs from energy support schemes and soaring interest payments on debt.

The Office for National Statistics (ONS) said the figure represented the highest monthly figure for December borrowing since records began in 1993.

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Chancellor Jeremy Hunt said: "Right now we are helping millions of families with the cost of living, but we must also ensure that our level of debt is fair for future generations.

"We have already taken some tough decisions to get debt falling, and it is vital that we stick to this plan so we can halve inflation this year and get growth going again ⁠— creating better paid jobs across the country."

The ONS added that the government spent an estimated £5bn on its energy price guarantee support scheme for households and businesses last month, with a further £1.9bn paid out for energy support payments.

Victoria Scholar, head of investment at Interactive Investor, said: "Public sector borrowing outweighed tax receipts in December, which is typically the case. While tax revenues increased, driven by rises in VAT, PAYE income tax and corporation tax including the energy profits levy, there were decreases in fuel duty, stamp duty and self-assessed income tax.

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"The central government also spent more on day-to-day expenditure versus December 2021 because of support for households and businesses with rising energy bills, adding to the imbalance.

"December’s borrowing also spiked largely because of student loan assumptions made by the OBR while government debt interest payable rose because of the effect of Retail Prices Index (RPI) changes on index-linked gilts."

Interest payments on government debt jumped to £17.3bn in December ⁠— the highest December on record ⁠— as a result of sky-high inflation.

Felicia Odamtten, economist at the Resolution Foundation, said: “Glimmers of good economic news have yet to show themselves in the public finances, with borrowing significantly higher than expected in December. Rising energy support and debt interest costs continue to drive up borrowing this year, though energy support is set to be far less costly next year.

“The disappointing news on the public finances will make the chancellor’s life harder as we come into the budget in March, reducing his room for manoeuvre.”

Read more: UK recession could be twice as bad as previously expected

Government debt has continued to surge after the decision in September to subsidise energy bills so that typical households pay no more than £2,500 annually.

From April, the state will lower its support, allowing households to pay typical bills of up to £3,000 instead.

Losses in pharmaceuticals AstraZeneca (AZN.L) and GSK (GSK.L) weighed on the FTSE 100, with both stocks dropping 2.54% and 1.45%, respectively.

Oil majors BP (BP.L) and Shell (SHEL.L) also added to losses, falling between 0.83% and 0.61%.

Meanwhile, Brent crude (BZ=F) slipped and was trading at around $86 per barrel, as hopes of a fuel demand recovery from top importer China waver.

In Asia, Tokyo’s Nikkei 225 (^N225) closed higher, climbing 1.46% to 27,299 points, while the Hang Seng (^HSI) in Hong Kong and the Shanghai Composite (000001.SS) were closed for Lunar New Year holiday.

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