London shares subdued as investors turn cautious ahead of budget

London stocks witnessed a muted session as investors exercised caution ahead of the upcoming budget announcement later this week. The blue-chip FTSE 100 index saw a marginal decline of 0.3 per cent with attention firmly fixed on Finance Minister Jeremy Hunt's pre-election budget slated for Wednesday.

While indicators of easing inflation have buoyed investor confidence, expectation surrounds the budget's potential impact on tax cuts and the overall economic landscape. Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown, noted that the Chancellor faces constrained fiscal manoeuvrability, tempering expectations of significant tax relief amidst existing borrowing commitments.

Sector-wise, declines were observed in automobiles, personal goods, and rate-sensitive homebuilders, with respective decreases ranging between 1 per cent and 2 per cent. The FTSE 100's recent underperformance against global equities has been attributed to its limited exposure to the technology sector, which has been driving gains elsewhere, propelled by an artificial intelligence-driven surge.

Among the individual stocks, BP rose 1 per cent following an upgrade from Jefferies, elevating the oil heavyweight to a "Buy" rating from "Hold" and contributing to a 0.3 per cent uptick in the oil and gas index. Precious metal miners also experienced a 1.6 per cent rise amid expectations of a potential US Federal Reserve interest rate cut, as spot gold prices lingered near two-month highs.

On the flipside, Mondi shares retreated by 2.1 per cent amid reports of the packaging firm revising its takeover proposal for DS Smith, although the latter saw a marginal uptick of 0.3 per cent. Meanwhile, the mid-cap FTSE 250 index registered a 0.3 per cent decline, driven primarily by a notable 8.8 per cent plunge in Hipgnosis, hitting a record low due to steep declines in asset valuations prompting the UK music investor to suspend dividend payments indefinitely.

(With Reuters inputs)