**Fresh Nervousness in Financial Markets After UK Budget Announcement**
The aftermath of Wednesday’s autumn Budget statement saw a significant impact on global markets, with the UK stock market losing ground and the pound weakening. Market reports revealed that the FTSE 100 in London dropped by 0.61%, marking a loss of 49.53 points and closing at 8,110.1 the day after the budget was announced.
The Budget statement particularly affected housebuilders such as Persimmon, Taylor Wimpey, and Barratt Redrow, as expectations for interest rate cuts shifted following Rachel Reeves’ announcements. The Office for Budget Responsibility (OBR) forecasted that inflation in the UK would remain above the Bank of England’s 2% target until 2029 under the new spending plans.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, noted that there was a sense of “fresh nervousness” in the markets regarding the UK economy, just a day after Labour’s Budget unveiling – the first in 14 years. Investors seemed to react strongly to the tax and spending plans put forth in the Budget, leading to a reevaluation of interest rate cut expectations.
The financial landscape saw a shift in the cost of state borrowing, as the yield on a 10-year government bond surged to 4.568%, the highest level seen since August 2023. Concurrently, the pound experienced a significant drop, weakening by about 0.75% against the US dollar to a more than two-month low of 1.286. Sterling also tumbled around 0.8% against the euro, trading at 1.185 euros.
Across European markets, the Cac 40 in Paris fell by 1.05%, and the Dax in Frankfurt closed down by 0.93%. The impact extended to the US, where trading began with tech giants like Meta and Microsoft experiencing share price declines, contributing to the S&P 500 dropping by 1.4% and the Dow Jones sliding by 0.5% by the close of European markets.
In company news, Shell’s shares saw a rise following the announcement of stronger-than-expected earnings for the latest quarter. The energy giant reported adjusted earnings of six billion US dollars (£4.6 billion) and noted a 4.5% increase in gas production compared to the previous year.
On a contrasting note, AB InBev’s shares declined as the drinks firm reported lower beer sales volumes due to reduced demand in China. Despite this setback, the company reported a 7.1% increase in earnings for the third quarter, attributing the growth to production-cost efficiencies.
The day’s trading also saw fluctuations within the FTSE 100, with DS Smith, Shell, British American Tobacco, CocaCola HBC, and Imperial Brands emerging as the biggest gainers. Meanwhile, Smith & Nephew, Persimmon, Taylor Wimpey, Howden Joinery, and Whitbread were among the prominent decliners on the stock market.
Overall, the post-Budget financial landscape reflected a sense of uncertainty and caution in markets as investors and analysts navigated the implications of the new spending plans and economic forecasts outlined in Rachel Reeves’ autumn Budget statement.