UK shares rise as bank tax surcharge proves less severe than feared

By Darshan Kumar R

Oct 28 - UK shares edged higher on Wednesday after British finance minister John Healey unveiled his first budget, with a smaller-than-expected tax surcharge on banks sparking a rally in the sector.

The blue-chip FTSE 100 index .FTSE rose 0.2% by 1428 GMT, while the midcap FTSE 250 .FTMC inched up 0.1% to a nearly two-month high.

Shares of Llyods Banking Group LLOY.L, Natwest NWG.L and Barclays BARC.L rose between 2.2% and 3.7%, leading gains in the FTSE 100 after Healey announced a temporary increase in the bank profit surcharge to 6% from 3% for 15 months, an increase that was less than feared.

"The move to raise the UK bank surcharge to 6% looks like a halfway compromise and it seems to have been taken very well by the market," said Christopher Peters, head of trading at Accendo Markets.

UK betting firms also rose after Healey announced a smaller-than-feared gambling tax increase. Entain ENT.L jumped 4.5%, Evoke EVOK.L rose 4% and Playtech PTEC.L added 1.4% after Machine Games Duty was raised to 25% from 20%.

Healey announced support to help households through the "global economic storms" with subsidies for energy bills and a freeze in fuel duty. British bond, stock and currency markets were largely sanguine after the announcement.

Investors are awaiting the Federal Reserve's monetary policy decision as well as earnings from big US technology firms later today for insights into the interest rate trajectory and the health of the AI trade - factors that have been the main drivers of financial markets this year.

Brent crude futures rose 1.3% to $115.41 a barrel after an attack on a Saudi Arabian refinery renewed concerns over potential supply disruptions, lifting the broader energy sector .FTNMX601010 0.5%. O/R

Among other movers, Standard Chartered STAN.L gained 3.5% after the Asia, Africa and Middle East-focused bank hiked its full-year growth and profitability targets after third-quarter income handily beat estimates.

Unilever ULVR.L fell 1.8% after reporting softer results in its foods business, dragging the personal care, drug and grocery sector .FTNMX452010 down nearly 1.2%.

GSK GSK.L dropped 4% as its pipeline-build push and growth plans via a £1.9 billion ($2.52 billion) cost-saving programme failed to convince investors.