By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- Insurance firms took a dive in London on
Wednesday after U.K. finance minister George Osborne announced
plans to scrap a rule that requires pension funds to be used to buy
annuities. Betting firms were also hit hard after an increase in
taxes on betting terminals.
The benchmark fell 0.5% to close at 6,573.13, paring back after
a 0.6% advance on Tuesday.
Insurers topped the list of decliners on Wednesday after U.K.
Chancellor of Exchequer George Osborne said in his budget speech
that no one will have to buy annuities anymore, but will instead be
able to get advice on how to make the most of their pension
savings.
"Pensioners will have complete freedom to draw down as much or
as little of their pension pot as they want, any time they want,"
he said in his budget speech at the House of Commons.
Annuities are the lifeblood for some insurance companies, so the
new rule is likely to have implications for the U.K. insurers,
Richard Hunter, head of equities at Hargreaves Lansdown
explained.
Shares of Legal & General Group PLC slid 8.4%, Resolution
Ltd. slumped 4.6%, Aviva PLC dropped 5.2% and Standard Life PLC
gave up 3.1%.
Another sector hit by the new budget was the betting firms.
Osborne said fixed-odds-betting terminals are highly lucrative and
that it's right to raise the duty on them to 25% from 20%. Shares
of William Hill PLC erased 6.8% and Ladbrokes PLC lost 12%.
Also on Wednesday in the U.K., investors weighed the latest
labor report from the Office for National Statistics. The
unemployment rate for the three months to January stayed at 7.2%,
which means the "old" Bank of England forward guidance from August
stays in place, as the 7% threshold for considering a rate hike
hasn't been reached.
Meanwhile, the number of people claiming unemployment benefits
fell by a more-than-expected 34,600 in February, while there was a
rise in average earnings in January. All this suggests the
near-term outlook for employment remains optimistic, with a good
chance the 7% joblessness threshold will be reached next month, Sam
Hill, senior U.K. economist at RBC Capital Markets said in a
note.
The minutes from the Bank of England's March meeting offered few
surprises, showing all nine of the central bank's policy-makers
voted unanimously to keep interest rates at a record low of 0.5%
and maintain bond-buying at 375 billion pounds ($622 billion).
Among other notable movers, shares of Smiths Group PLC fell 3.7%
after the engineering company said profit fell in the first half of
its fiscal year, but that it expects improved trading in the second
half.
Shares of HSBC Holdings PLC (HSBC) gave up 1% after Credit
Suisse cut the banking heavyweight to underperform from outperform.
The analysts said they were disappointed the group hasn't been able
to capitalize on its strengths "in terms of funding, liquidity and
exposure to global trade." Instead, the Credit Suisse analysts
prefer Standard Chartered PLC in the U.K./Asian banking space.
Standard Chartered shares slipped 1%.
Also declining, Antofagasta PLC dropped 5.3% after Credit Suisse
cut the miner to underperform from neutral.
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