London’s FTSE 100 kicks higher ahead of Truss energy package

London’s FTSE 100 kicked higher today after new prime minister Liz Truss launched an around £130bn cost of living support package.

The capital’s premier index climbed 0.33 per cent to 7,262.06 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, added 0.36 per cent to close at 18,878.29 points.

The new PM said energy bills will be frozen at £2,500 from October. Businesses will receive the same help for six months.

Truss’s plans add “a fresh burden to Britain’s debt pile in the hope it’ll kick start growth in the economy,” Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said.

The package will be funded through a short-term borrowing splurge, raising fears over the UK’s public finances, which are already riddled with debt taken on to deal with the Covid-19 crisis.

Greater borrowing has sent UK government debt yields on an upward spiral, driven by investors demanding a discount to swallow more bonds. Yields and prices move inversely. 

Front-end and back-end UK gilt yields climbed higher today.

The coming bond dump also put downward pressure on the pound, which slid nearly 0.5 per cent against the US dollar.

A weaker pound tends to lift the FTSE 100 due to a large proportion of the index being made up of exporters. Miners benefited from the pound’s drop, with Antofagasta and Rio Tinto up more than two per cent.

USD/Pound exchange rate this year

London’s FTSE 100 was also boosted by a strong trading day on Wall Street yesterday which saw all of the US’s main indexes finish higher.

Retailers also dragged the index higher, with high street fashion store JD Sports and middle-class favourite and online supermarket Ocado up around two per cent.

Oil prices climbed around two per cent.