The Central Bank of Egypt raises interest rates by 100 basis points for the first time since March 2024

British Finance Minister John Healey said that the government will work to reduce spending on social welfare benefits, in an effort to address one of the most prominent challenges that still face public finances, following his announcement of the first government budget.

Healey said, in an interview with the British Broadcasting Corporation (BBC): “We have to reduce the subsidy bill, but this cannot be achieved through random cuts.”

Haley did not specify a date for the start of the decline in social welfare spending, in response to a question about whether this would happen before the next elections, scheduled no later than mid-2029.

In statements to reporters later, Prime Minister Andy Burnham said that the government was “working as hard as possible” to reduce the subsidy bill as quickly as possible.

Haley's tax and spending plans included short-term support for families affected by the rise in energy prices resulting from the US-Iranian war, with part of this support being financed through increased taxes on banks, savers, and property owners.

But the budget did not address long-term challenges, including how to raise defense spending to the equivalent of 3 percent of economic output, offset the impact of inflation on public spending, and contain the growing social welfare bill, which includes pensions, as well as subsidies provided to people who are considered unable to work due to their health conditions.

The cost of spending on social care is expected to exceed 11 percent of British economic output during the current year.

The opposition Conservative Party and some bond investors believe that this level of spending reflects, in their estimation, the Burnham-led Labor Party's lack of the necessary will to reduce government borrowing.

However, the markets generally reacted positively to the budget announced by Haley, while the British government's ten-year borrowing costs fell to their lowest levels in a month on Thursday.

Healy focused on the problem of youth unemployment, saying: “This system is not sustainable.” “I feel a moral duty to deal with these young people who have been abandoned.”

He added that the government will help unemployed youth, while obliging them to take advantage of the opportunities available to them.

Edwin Latimer, chief research economist at the Institute for Fiscal Studies, said that this approach may achieve spending savings, but it is “more vulnerable to uncertainty than directly reducing benefits or eligibility requirements,” suggesting that the savings will likely take longer to achieve, if they can actually be achieved.

The results of a government review into the conditions of young people not in work, education or vocational training, along with another review of the disability benefits system, are scheduled to be published next month.

On the other hand, the Resolution Foundation, a left-leaning research organization, criticized Haley, saying that the government distributed the main support in the budget too widely, as it decided to reduce energy bills by 100 pounds ($133) for about 20 million families, to partially mitigate the sharp increase in bills resulting from the US-Iranian conflict.

“Even households who receive assistance will face higher energy bills than during the previous energy price shock,” said Ruth Curtis, the foundation’s chief executive.

The Foundation added that the average energy bills for families are expected to rise during the current fiscal year to 1,750 pounds annually, after taking into account government support, an increase of 4 percent compared to the levels recorded after the Russian invasion of Ukraine in 2022.

The main indices on Wall Street fell during trading on Thursday, as investors refrained from shares of the parent company of Google, following results that raised concerns about the sustainability of the global technology boom, while European stocks rose supported by strong corporate results.

In Asia, South Korean stocks closed lower, Hong Kong and Shanghai stocks fell, while Japanese stocks rose.

On the other hand, European indices rose after the European Central Bank kept interest rates unchanged, following the US Federal Reserve’s decision to stabilize borrowing costs on Wednesday.

The euro fell after European Central Bank President Christine Lagarde announced her intention to step down from her position next February.

AJ Bell Investment Director, Ras Mold, said that European markets achieved strong gains on Thursday, supported by positive business results for companies, contradicting the negative trend that prevailed in Asian markets overnight.

The record profits of the oil companies “Shell” and “Total Energies” contributed to supporting the London and Paris stock exchanges, after the two companies benefited from the disruptions in oil and gas supplies in the Middle East, which boosted prices and refining margins.

But crude oil prices fell by about 2 percent, amid reports of renewed diplomatic efforts between the United States and Iran to avoid launching additional strikes.

On Wall Street, the Nasdaq Composite Index, which was dominated by technology stocks, fell by 1.4 percent at the opening, after Alphabet shares tumbled as a result of announcing profits below expectations, with continued large spending on artificial intelligence.

Trade Nation analyst David Morrison said that the stock quickly fell by more than 10 percent, after investors focused on the sharp decline in free cash flows and the slowdown in the growth of the search engine “Google.”

Concerns are rising that the growing use of search tools supported by artificial intelligence will undermine Google's core activity in search and advertising, which constitutes a major source of the company's revenue.

The disappointing results of the South Korean company Samsung Electronics have increased doubts about the expected returns from investments in artificial intelligence. Although the company, the largest producer of memory chips in the world, recorded record quarterly profits, the results of the semiconductor sector fell short of market expectations.

On the other hand, Microsoft announced revenues and profits that exceeded expectations, supported by the performance of the Azure cloud computing sector, and its shares rose by 0.8 percent.

Jim Reed, from Deutsche Bank, said that the results of technology companies will remain the focus of the markets' attention, with Amazon and Intel announcing their results after the US market closes.

The markets had recorded strong gains during the previous two days, supported by the results of the South Korean company SK Hynix, which specializes in chips, in addition to the announcement of Anthropic, the developer of the artificial intelligence model “Cloud”, to submit a file for an initial public offering.