UK markets shrug off Hunt’s budget; bank turmoil in focus

LONDON (Reuters) – British markets, roiled by concerns about European banks after shares in Credit Suisse fell 30%, showed little reaction to Chancellor Jeremy Hunt’s budget on Wednesday.

The pound picked up slightly against the euro as Hunt delivered the budget, in which he said Britain’s official forecaster expected the economy to avoid recession this year.

Hunt said the economy was likely to shrink 0.2% in 2023, compared to a previous forecast for a 1.4% contraction. He also said inflation was expected to fall to 2.9% by the end of the year.

The euro fell to a session low of 87.25 pence as Hunt talked. It was last down 1.14% at 87.29 pence.

However, the euro had already fallen sharply, with a big drop in European bank stocks spooking investors that were already on edge since the collapse of U.S. lender Silicon Valley Bank late last week.

Shares in Swiss bank Credit Suisse were last down 28.35%, after a key backer said it could not provide the company with more financial assistance.

Yields on British government bonds, or gilts, were also down sharply on the day, as part of a broader investor push into safe-haven assets, but marginally pared some of their declines as Hunt spoke.

The yield on the 10-year gilt was last down 17 basis points to 3.311%.

Britain’s FTSE 100 stock index was down 3.05%, with financial companies leading the falls. Insurer Prudential was down 11.96% while Barclays was down 8.65%.

(Reporting by Harry Robertson)