London midday: FTSE gains ahead of Budget

London stocks were in the black by midday on Wednesday, with all eyes on the long-awaited Budget after a series of leaks and U-turns that has kept investors on edge.

The FTSE 100 was up 0.4% at 9,644.95.

Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: "UK stocks opened on the front foot this morning, buoyed by softer US economic data that reinforced expectations of a December rate cut across the Atlantic. But the calm may be short-lived.

"All eyes turn to Rachel Reeves this afternoon, as she unveils a Budget expected to deliver tens of billions in new taxes - a move that could ripple through markets and consumer confidence alike.

"Despite being squarely in the crosshairs, UK banks look set to escape the most severe blows. If tax changes materialise, the most probable lever is a hike in the banking surcharge. Based on our modelling, that would translate into a low to mid-single-digit hit to profits for the big five.

"The pain, however, won’t be evenly distributed. UK-centric lenders like Lloyds and NatWest would bear the brunt, with nearly all their earnings exposed to domestic taxes. Global giants such as HSBC and Standard Chartered, by contrast, enjoy a natural hedge thanks to their diversified international footprints."

In equity markets, precious metals miner Fresnillo shone as gold prices rose, with gold producers Hochschild and Endeavour Mining also higher.

Pets at Home advanced after saying it was taking "action at pace" to address its disappointing retail performance after interim profits at the pet shop and veterinary chain slumped by a third.

The company said it has kickstarted a restructuring program to reduce group overheads by £20m, which will incur non-underlying costs of £6-8m this financial year.

Animal genetics firm Genus rose as Berenberg started coverage of the stock at ‘buy’, saying that the long-term underlying dynamics of the business look attractive.

Elsewhere, quality assurance specialist Intertek edged up after saying it had bought US-based Professional Testing Laboratory, which provides testing services for the flooring industry, for an undisclosed sum.

Global specialty chemicals company Elementis ticked higher after saying it had bought UK-based Alchemy Ingredients for an enterprise value of $22m on a cash-and-debt-free basis.

On the downside, advertising group WPP slumped ahead of its expected demotion from the FTSE 100.

Russ Mould, investment director at AJ Bell, said WPP was "paying the price for a succession of profit warnings that have destroyed its market value".

"The company is already battered and bruised, and losing FTSE 100 status would round off an annus horribilis for the advertising agency," he added.