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Investment view

Budgets are not what they used to be. It is not just that the speech itself contains little other than brief mentions of the major issues, with all the real meat being left to the press releases, but dramatic gestures by Chancellors seem to be a thing of the past, too.

True, upping the funding for the National Heath Service on the scale planned is pretty dramatic while increasing National Insurance contributions by 1 per cent on both sides is hardly mealy-mouthed. But the reality is that any Chancellor today will be looking over his shoulder at what the markets will make of the measures and, if the initial market reaction is anything to go by, traders were pretty much as bored as I was.

For a start, with the broad direction of the Budget being heavily signalled in advance, there were no real surprises. Indeed, perhaps the biggest surprise was that the Chancellor did not do more. Upping stamp duty on private houses looked a dead cert to me but in the end the only change was to close some loopholes for commercial property transactions. Presumably, the Treasury&#39s view is that taking money out of the consumers&#39 pockets by increasing National Insurance will be enough to slow spending. Yet growth forecasts have been raised. I hope Mr Brown knows what he is doing.

In the context of what is now permissible within an increasingly global marketplace, last week&#39s Budget was as close a return to old Labour ideals as is practical without seeing capital walk offshore. Actually, it may have been enough to frighten some capitalist horses. Foreign bankers are questioning whether maintaining branches in London is appropriate, given the higher costs of employing labour. Certainly, the NI hike will hit the City hard at a time when fees are still difficult to come by.

Oil shares naturally took a bit of a dive on the news of a windfall tax. This was the Chancellor at his most cunning. Oil companies are perceived as greedy, so they seem a soft target for taxation. Of course, he could also announce that the duty on fuel was being frozen. Yet the cynic in me believes that oil companies are likely to pass on the extra cost by raising the cost of petrol at the pumps. Very clever really. The Chancellor gets his extra revenue and the oil companies get the blame.

At least the real effect of the Chancellor&#39s measures will not be felt until next year but companies will surely be looking at their payroll to see if savings can be made to minimise the impact. Already, average earnings are rising at their lowest rate for some time, primarily because there are few big City bonuses coming through. It would be ironic if this Budget created the conditions for unemployment to rise again. Try meeting those ambitious growth targets when the dole queues are lengthening and people stop spending because they are nervous about where their next pay cheque is coming from.

With the Budget out of the way, perhaps we can now focus on where the next push for a resumed bull market will come from. Sadly, it does not seem to be coming from the telecommunications and technology sectors, where more bad news abounds. Nokia was the main villain last week but, even so, there was something of a better tone to markets overall. Banks, in particular, started to buck the trend but even this was insufficient to disturb the restrictive nature of the trading range.

Hope springs eternal that the breakout, when it comes, will be on the up side. But May is just around the corner and old habits die hard. This looks like one very slow market recovery.

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