By Tommy Stubbington and Clare Connaghan
U.K. stock markets slipped Wednesday driven by insurance
companies which took a hit after the U.K. budget unveiled a series
of radical reforms to the pension system.
London's FTSE 100 fell 32.15 points or 0.49%, to 6573.13. after
the U.K. Chancellor of Exchequer outlined a new tax regime for
defined-contribution pension schemes, where payouts depends on the
size of the pot of cash accumulated. Previously, savers had to buy
an annuity from an insurer, but now they don't, George Osborne
said.
"By changing some of the pensions rules on cashing out pension
savings, Osborne has hit the annuity market extremely hard," said
Neil Dwane, chief investment officer for Europe equity, at Allianz
Global Investors.
Shares in insurers fell sharply with Resolution Ltd. declining
4.6% while Aviva PLC ended 5% lower and Legal & General Group
PLC closed down 8%.
"The average pensioner may well opt to take his pension in cash,
or the first GBP30,000 ($49,916) of it which would have bought an
annuity--clearly negative for many of the insurance providers,"
added Mr. Dwane.
More broadly, Mr. Osborne said the U.K. economy will grow more
rapidly than previously expected but that the government won't slow
its program of deficit reduction.
In the government bond market, gilts were little changed from
Tuesday's close but still fared better than German Bunds and U.S.
Treasurys, their haven peers after the U.K. government said it
would sell fewer gilts than anticipated.
The extra yield demanded by investors to hold 10-year U.K. gilts
instead of German Bunds narrowed by 0.02 percentage points to 1.10
percentage points.
Elsewhere, European stock markets were mixed ahead of the U.S.
Federal Reserve's policy meeting later. The benchmark Stoxx Europe
600 index fell 0.3 points or down 0.09% to 327.63. In Germany, the
DAX rose 34.50 points or 0.37% to 9277.05, while in Paris, the CAC
fell 5.20 points or 0.1% to 4,308.06 points.
In corporate news, German luxury car maker BMW AG rose 7.28%
after giving a bullish outlook for profit and sales this year.
In commodities, the London Metal Exchange's three-month copper
contract fell as much as 2.5% earlier to $6,321 a metric ton, its
lowest price since July 2010 amid ongoing concerns over the
situation in Ukraine and worries about Chinese growth. Meanwhile,
gold was down 1.1% at $134.04 an ounce, while Brent crude slipped
almost 0.5% to $106.28 a barrel.
Write to Tommy Stubbington at tommy.stubbington@wsj.com and
Clare Connaghan at clare.connaghan@wsj.com