Hammond’s first Budget

March 14, 2017

The budget last week was accurately publicised to be underwhelming, as intended by the Chancellor, Philip Hammond. The Chancellor chose to increase national insurance on the self-employed as well as cutting the dividend allowance to £2,000. While these changes were aimed at balancing the tax burden between employed and self-employed workers, they were widely seen as a breach of the Conservative party election mandate not to raise taxes. The Chancellor used the better news on the economy and forecasted reduction in borrowing to build a buffer against anticipated Brexit uncertainty rather than look to increase spending in the near-term.

The oil price dropped over 7% last week, following reports of rapidly increasing inventory in the US. The data indicates that the level of production has improved faster than expected in the significant US shale oil industry. During the period of relative stagnation in the oil price, speculators had opened substantial long positions in the commodity, effectively backing the success of the Organization of Petroleum Exporting Countries (OPEC) decision to cut their production. The price fall last week will have been magnified by some of these positions being closed. OPEC may need to give another signal that they are committed to the proposed cuts as well as maintaining market balance to limit further falls.

US non-farm payroll data was released last week, showing that job growth remains strong. The US economy added 235,000 jobs in February, more than the 200,000 forecast. Additionally, previous months’ job figures were also revised upwards, making February the 4th consecutive month of 200,000+ jobs growth. This was received positively by equity markets around the world. Furthermore, the strong jobs market has now cemented in the minds of investors that the Federal Reserve will raise interest rates by another 0.25% this month.

Index Open Close Change % Change
FTSE 100 7374 7343 -31 -0.42%
S&P 500 2383 2372 -11 -0.46%
Dax 12027 11963 -64 -0.53%
Cac 40 4995 4993 -2 -0.04%
Nikkei 225 19379 19604 225 1.16%
UK 10 Year Gilt Yield 1.18 1.24 0.06 5.08%


The Dutch general election will take place on Wednesday. This will be closely watched my markets, as it will give an indication of the level of populism in Europe. UK unemployment figures will be released on Wednesday and the Bank of England interest rate decision on Thursday.