LONDON: European shares gained on Friday marking an upbeat end to the week, helped by an initial boost after the British government’s turnaround on tax cuts, but this faded due to continued uncertainty about its fiscal stance.
The region-wide STOXX 600 index closed up 0.6%, building on Thursday’s rally but was still off session highs hit immediately after British Prime Minister Liz Truss announced the scrapping of parts of the government’s fiscal programme.
Truss fired her finance minister Kwasi Kwarteng and said Britain would retain plans to increase corporation tax.
Kwarteng, whose announcement of unfunded tax cuts had sparked a rout in bond markets last month, has been replaced by former foreign and health minister Jeremy Hunt.
“It’s been a little bit of a relief trade but we still have concerns that we don’t know exactly what is happening. We’re going to have to keep an eye out on what the new Chancellor says next week,” said Daniela Hathorn, market analyst at Capital.com.
“Markets need a bit more clarity on what this fiscal plan currently stands at and they’re going to want to know exactly where we can see the funding come from.” The pound fell against the dollar, trading down 1.2%, near the day’s lows, while two-year gilt prices, which turned lower before Truss spoke, dropped further in late trade.
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