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Wall Street slips and FTSE 100 finishes flat as Hunt reveals City regulation overhaul

FTSE 100 London, UK. 27th Oct, 2022. Jeremy Hunt, Chancellor of the Exchequer, 10 Downing Street London UK Credit: Ian Davidson/Alamy Live News
FTSE 100 traders digested plans to reform the financial services industry unveiled by chancellor Jeremy Hunt. Photo: Ian Davidson/Alamy Live News

The FTSE 100 and European stocks closed mixed this Friday, as investors digest the government’s plan to overhaul City rules following Brexit.

The FTSE 100 (^FTSE) closed flat at 7,472 points, while the CAC (^FCHI) in Paris gained 0.29% to 6,666 points. In Germany, the DAX (^GDAXI) rose 0.63% to 14,354.

Banking shares were higher with Lloyds (LLOY.L) up 0.78% and Barclays (BARC.L) up 1.43%.

Associated British Foods (ABF.L) was down 0.76%, after the Primark owner reiterated a forecast that group profit would fall over the year.

Read more: FTSE 100: Berkeley profits dip as average selling price falls

Traders are now looking at the announcement of chancellor Jeremy Hunt's easing of regulations affecting the UK's financial sector.

The government confirmed it plans to change the law to require the Bank of England’s Prudential Regulation Authority (PRA) to focus more on the financial sector’s global competitiveness, as part of Friday’s wider-ranging reforms.

There is a risk that the proposals forget the surge in risk-taking that led to the 2008 crisis, warned Victoria Scholar, head of investment at Interactive Investor.

“UK chancellor Jeremy Hunt is a major sweep of reforms to the financial sector being described as the second ‘Big Bang’. The UK Treasury said it plans to reform short selling, consult on removing the rules for capital deduction at banks and reform securitisation. There is expected to be a sweep of more than 30 regulatory reforms as the UK desperately tries to maintain its position as a key global financial hub post Brexit," she said.

"Hunt is trying to prove to the financial sector that he is very much pro-business and in favour of the City of London as a key growth engine to the economy. However there is a risk that the Treasury is acting myopically, quickly forgetting the pre-2008 excessive risk taking that ultimately led to the global financial crisis and the introduction of new regulation to prevent another similar catastrophe."

Read more: Bank of England 'set to raise' interest rates to 3.5%

Chancellor Hunt said the so-called "Edinburgh Reforms" will seize on "Brexit freedoms" to overhaul banking rules.

They include a package of more than 30 regulatory reforms which he claims will "turbocharge" growth in towns and cities across the UK.

On Wall Street, most stocks slipped after a report showed inflation is still hotter than expected, even though it is slowing.

The Dow Jones (^DJI) was muted at 33,783 points as trade ceased across Europe. The S&P 500 (^GSPC) gained 0.18% to 3,970 points and the tech-heavy Nasdaq (^IXIC) lost 0.24% to 11,108 points.

Meanwhile, Brent crude (BZ=F) was hovering around $77 per barrel, with oil prices on course for a 10% loss this week.

In Asia, Tokyo’s Nikkei 225 (^N225) rose 1.18% to finish at 27,901 while the Hang Seng (^HSI) in Hong Kong jumped 2.32% to 19,900. The Shanghai Composite (000001.SS) gained 0.30% to 3,206 points.

Watch: S&P snaps losing streak on jobless claims rise