Banking shares took a hit after speculation that Chancellor John Healey would increase tax on the sector.
Barclays, Lloyds and NatWest all saw their share prices fall after reports that Healey might increase the current 3% surcharge on top of corporation tax back to the 8% level last seen in 2023. Doing so could potentially raise around £2 billion a year for public finances.
Banks joined gambling firms and oil and gas producers in protesting against the idea of higher taxes in the UK, arguing such action could discourage investment and lead to job cuts. That would be counterproductive to the government’s drive to grow the economy.
The government might argue that banks are doling out significant amounts of money in dividends to shareholders, implying there is plenty of scope for them to pay a little bit more tax. The flipside is that any hit to dividends to offset higher taxes would penalise the large number of people in retirement who invest in banking shares for income.
The pullback in banking shares acted as a drag on the FTSE 100, leaving it lagging other parts of Europe. Fortunately, the FTSE 100’s downward movement was only marginal at a 0.1% decline, meaning the week didn’t end on a completely sour note.
Futures prices imply a relatively calm session in the US when Wall Street opens later. It was also positive to see a small decline in the price of oil. Brent crude dropped 0.5% to $105 per barrel.
The lack of action across markets on Friday is a massive win in the context of the drama seen earlier in the week. The tech stock wobble was felt globally as the sector is a favourite among many investors given it has been a source of strong returns in recent years.
Tesla
Tesla has made every child of the 80s’ dream come true. The idea of cars with thrusters to jump over objects comes straight out of Knight Rider or Back to the Future. Rather than David Hasselhoff stepping out of the car ready to save the world, it’s Elon Musk.
If there is one thing that Musk excels at, it is knowing how to grab people’s attention. The launch of the Tesla Roadster is the talk of the town, with half saying, ‘I want one now’ and the other saying ‘Is that legal?’
Musk will almost certainly hope the launch event reinvigorates interest in Tesla following a challenging period for the business as it grapples with heightened competition in the electric vehicle market.
More recently, Musk has talked up humanoid robots as the next big thing for Tesla, but that hasn’t stirred up a lot of excitement.
A flying car is certainly pulling a rabbit out of the hat, but as with many of Musk’s bold ideas, the vehicle won’t be available for quite some time.
The Roadster unveiling has got everyone talking about Tesla again, but it hasn’t moved the dial for the company’s valuation. Tesla’s shares were unmoved in pre-market trading, suggesting that investors view the Roadster as more of a gimmick than something capable of creating a significant boost to earnings.
Dan Coatsworth: Head of Markets
Dan Coatsworth is AJ Bell's Head of Markets. Dan has been with the company since December 2012 and has more than 18 years' experience in the industry, following the markets and all things investing. He...