- FTSE 100 drops 68 points
- Shell profits fall less than expected, buyback repeated
- Smith + Nephew, Kainos and Spectris issue profit warnings
4.04pm: Sell-off on both sides of Atlantic
UK blue-chip stocks are at their lowest since the 9 August, while US stocks are on course to erase most of their previous gains this month.
The FTSE 100 is down 68 points or 0.8% at just over 8,090, but off its worst levels for the day as we head into the last half hour of trading for the day, with gilt yields easing back from their highs.
Across the pond, Wall Street is also thinking that maybe shares are overpriced for now.
The S&P 500 has dropped 1.5% and the Nasdaq plunged 2.4%, while the Dow Jones is down 0.8% and the small cap Russell 2000 has slipped 0.9%.
Volatilty is unsurprisingly elevated, with the VIX 'fear index' rising 13% to over 23.
These are Wall Street's largest daily drops in almost eight weeks, led by Microsoft falling almost 6% and Nvidia almost 5%.
2.45pm: Bears emerge as global market mood sours
The global market mood is souring, says market analyst Fawad Razaqzada at City Index, with the FTSE 100 down 1%, DAX down 1.1%, the S&P 500 down 1.5% and the Nasdaq down 2.3%.
He says the US tech sector is "in the spotlight" following earnings reports from Meta and Microsoft and ahead of those from Apple and Amazon this evening, while investors brace for key US non-farm payrolls and ISM services PMI to round out the week.
"With the US election just around the corner, many investors are adopting a more cautious stance, sparking speculation of a much-anticipated correction in the S&P 500 forecast," he says.
"This week’s price action suggests investors are taking a wait-and-see approach until post-election, proving bearish traders an opportunity to finally show their presence."
Razaqzada says weaker European market sentiment followed the release of stronger-than-expected GDP growth and CPI inflation, "complicating hopes for an aggressive rate cut from the ECB".
Amid rising market uncertainty, the VIX volatility index has also climbed to 21.85, which "underscores investor caution ahead of next week’s US election and key economic data releases".
The US jobless claims and PCE inflation figures today both failed to provide any immediate market reaction, he notes, with more consequential non-farm payrolls and ISM services data to come on Friday.
1.48pm: Wall Street starts with a slump
US stocks have slumped after the opening bell, led by big tech.
While the Dow Jones has dropped 0.5%, the Nasdaq has crumpled 1.45% and the S&P 500 is in between, down 0.9% in opening trades.
The Russell 2000 has started 0.3% lower.
Super Micro Computer Inc (NASDAQ:SMCI) is down 8%, ARM Holdings PLC 7%, Microsoft Corp (NASDAQ:MSFT) has dropped 5%, Micron Technology Inc (NASDAQ:MU), Broadcom and NVIDIA Corp (NASDAQ:NVDA, ETR:NVD) have all dropped more than 2% so far.
1.35pm: Gilt yields on the rise
UK bonds are selling off again.
This is sending yields higher, with the UK 2yr gilt yield and 10yr bond yields both rising to almost 4.5%.
This compares to 4.32% and 4.28% yesterday morning.
There was a bout of selling after the Budget as the UK Debt Management Office’s released its revised gross financing needs that were twice what some economists expected between 2025 and 2029.
As some economists noted, the Budget was one of the largest fiscal loosenings of any fiscal event in decades.
The FTSE 100 has dropped lower in recent minutes too, down 0.9% to 8,086.
Meanwhile, the FTSE 250 and AIM 100 are down 1.5% and 1.4%, undoing the gains in the hours after the Budget yesterday.
1.22pm: Market 'still adjusting' to Budget
"It's still early days, but the immediate price action following the conclusion of the Chancellor's budget has not been favourable for our constructive bias on sterling," says Deutsche Bank macro strategist Shreyas Gopal.
The sell-off across the gilt curve is "likely partly reflective of higher than expected issuance projections" after the current fiscal year, he says.
"The fact that UK equities are not materially underperforming peers this morning suggests that overall the market is adjusting to a larger-than-expected fiscal event (and expecting a more hawkish Bank of England as a result), rather than incorporating an idiosyncratic fiscal risk premium across UK assets."
Gopal says the GBP is "a slight outlier" here, noting that he had been of the view that the currency would continue to take its cue from differentials in central bank pricing.
With the market now pricing fewer than 100 bps of cuts between now and the end of 2025, and a gap in policy rates with the ECB of nearly two percentage points, "this ought to be a positive signal for the pound", he says, but EUR/GBP is slightly higher than it was before the Budget.
One explanation could simply be the event triggering a small positioning reduction ahead of next week's big macro events, including Fed and BoE meetings.
"Nevertheless, the stakes are now also higher for next week's Bank of England meeting, at least from a currency perspective.
"The hawkish repricing of the front-end increases the onus on the central bank to not pivot dovishly despite the large miss on services inflation last month and the Governor's hints at a more 'activist' stance a few weeks ago.
"Conversely, the MPC sticking to its more cautious messaging on cuts from the last meeting should then see sterling catchup to the signal from rates, and recover some of its lost ground over the past 24 hours."
1pm: Reaction Engines calls in administrators
Administrators from PwC have been called in at Reaction Engines, the developer of engines to power an aircraft faster than Concorde, which is backed by BAE Systems, Rolls-Royce Holdings PLC (LSE:RR.) and investment funds at Schroders and Artemis.
PwC says 173 of the Oxfordshire-based company's 208 staff have been immediately made redundant.
The company had been in talks for several weeks with new and existing backers about a £20 million funding.
Sarah O’Toole, joint administrator and partner at PwC, said it was with “great sadness that a pioneering company with a 35-year history of spearheading aerospace innovation has unfortunately been unable to raise the funding required to continue operations”.
12.12pm: Financial markets not in the mood
The FTSE 100 and 250 remain firmly lower, both down around 0.7%, in line with stock markets across the Channel.
"European markets have found themselves stuck in the red this morning," says market analyst Josh Mahony at Scopre Market, noting that traders are feeding off the pessimistic market reaction to Meta and Microsoft earnings after the US close.
"With UK treasury yields pushing sharply higher, we continue to see borrowing costs rise despite the expectation of further easing from the Bank of England next month.
"However, with treasury yields rising across the board, traders will soon start to look towards the central bankers to see if they deem it necessary to ramp up their pace of easing in a bid to reverse this recent trend."
Mahony sees the US session promising "plenty of fireworks", with a negative reaction to Meta and Microsoft earnings as traders await the core PCE inflation figure and numbers after the close later from two more tech giants, Apple and Amazon.
"With both Meta and Microsoft beating on the top and bottom line, investors instead baulked at the expectation of increased AI spending as we go forward. Strong advertising and cloud revenues remain a positive theme for big tech, with Apple and Amazon both looking to take advantage of these trends."
11.45am: Mixed picture of property sector
Earlier we had updates from HM Revenue & Customs on property transactions and from the Royal Institution of Chartered Surveyors (RICS).
Sales of residential properties increased by 9% in September compared to the same month last year, according to the latest HMRC data, with an estimated 91,820 home sales across the UK last month, which was marginally higher than in August on a seasonally-adjusted basis in what was the first monthly uptick since May.
Iain McKenzie, CEO of the Guild of Property Professionals, calls it a "picture of stability".
As the industry digests what the effects of the Budget might entail, he says, "one thing that should reassure any fears that the market will stall will be that lower and middle-income buyers are not in the government’s sights when it comes to tax rises".
As for the RICS report, it showed the UK commercial property market remained sluggish in the third quarter, with respondents noting a cautious atmosphere, with many adopting a “wait and see” approach ahead of the Budget.
Occupier demand rose slightly in the third quarter, with a net balance of +5%, marking a continuation of the modest gains seen earlier this year. Industrial properties led the market, posting a net balance of +14% in demand, while office and retail demand remained mostly flat, with retail sentiment reaching its least negative point since 2022.
"The Q3 RICS commercial survey painted a somewhat mixed picture of the market," said Matthew Pointon, real estate specialist at Capital Economics.
"There was a slight improvement in investment and capital value expectations, but rental expectations were revised down.
"That highlights that the road to recovery for commercial property will be bumpy and modest by past standards, not helped by the major sectors which are all expected to perform relatively poorly."
11.31am: Stock markets unenthusiastic
London's main share indices, from the blue chips through the mid-caps and on AIM, are all in the red, as are stocks in Europe.
Banks are one of those going a different direction, as the pace of rate cutting is seen as remaining slow, based on the latest Budget reactions.
There are only a baker's dozen shares in positive territory in the Footsie, but many of them are banks, including NatWest and Lloyds, with HSBC and StanChart also in there.
US futures are also pointing to further falls for Wall Street's main benchmarks.
In pre-market trading Apple's earlier losses have been mostly erased, but Facebook parent Meta Platforms is expected to fall 2.8%.
11.01am: Halloween references
Profit warnings from Smith & Nephew, Kainos, Spectris and Nexteq has prompted the (always easily persuadable) financial commentators into some Halloween references.
“The Halloween effect sent shivers down the spines of investors," says Russ Mould at AJ Bell.
Both Smith & Nephew and scientific instruments group Spectris were hit by Chinese weakness, while Kainos blamed hesitancy among public sector clients along with general corporate caution.
Small caps industrial tech firm Nexteq fell 17% after blaming industry destocking for slowed new orders and customers delaying agreed project spending into the new year.
“All these warnings point to a tough trading environment, even for companies with specialist expertise,” says Mould.
Deutsche Bank's Jim Reid, as well as letting readers know of his plans to attend "a Halloween themed fancy dress party tomorrow night as Marilyn Manson", also noted "lots of tricks and treats for markets over the last 24 hours with some of the highlights being a -22.3% drop for the Trump Media and Technology group, a 10-13bps rise in 2yr European yields and a 15bps climb in Gilt yields off the lows for the day across the curve after the budget".
One for the heads, that.
Elsewhere, John Plassard, senior investment specialist at Mirabaud Group, highlights research by two finance professors, Ben Jacobsen and Cherry Yi Zhang, that discovered investing in equities every year on 31 October over 323 years of stock market data from more than a hundred stock markets around the world showed a strong Halloween effect.
For 65 developed and emerging markets, average stock market returns for the six months following Halloween were around 8.5% per annum, versus returns for the other six months of the year from May to October averaging just 2.1%.
Their studies conclude that the “Halloween effect” is particularly pronounced in the most active and liquid markets, such as the US and developed markets.
10.19am: Virgin Money hikes mortgage rates, Santander cuts
Different bank reactions after the Budget, with Virgin Money nudging up mortgage rates and Santander reducing its rates.
Virgin Money, which is part of Nationwide since the start of this month, announced increases across its range of fixed-rate mortgages, with increases of up to 0.15%.
UK bonds have been selling off, sending gilt yields higher in the lead up to the Budget, but have continued to rise today.
Meanwhile, Santander reduced its rates by up to 0.36%.
"Virgin Money’s decision to raise rates right after the Budget announcement feels like ill timing, particularly when many are watching closely for economic stability signals. At this point, it’s too early to say if this move will spark a broader industry shift or simply reflect Virgin’s own strategic response," says Kim McGinley, director and specialist broker at VIBE Finance.
"Mortgage holders and those looking to borrow will be keen to see whether other lenders follow suit. But for now, patience is key; it’s important to observe how the market reacts and whether this adjustment becomes a trend or remains an isolated decision."
10.05am: Eurozone CPI inflation higher than expected
Eurozone inflation picked up more than expected this month, according to figures just out now.
The consumer price index was up 0.3% on a month ago, up from the 0.1% month-on-month fall in September and higher than the consensus estimate of 0.2%.
Annual CPI inflation picked up to 2.0% from 1.7%, higher than the 1.9% average forecast.
Core CPI remained at 2.7%, having been expected to ease to 2.6%.
European stocks are continuing to wallow in the red, with the DAX down 0.6% and the CAC 40 falling 1%.
European and UK bonds have continued to creep up in the past few days.
9.50am: Budget analysis continues
Other City views on yesterday's Budget, as bond markets continue to reprice UK gilts as traders mull the Budget.
Barclays cross-asset analysts say Rachel Reeves' package "could improve sentiment around UK stocks. But the gilt curve is likely to remain under steepening pressure".
It was a more expansionary package than Barclays anticipated, but based on an initial assessment, "we think the impact on real GDP growth and inflation could be to raise both in the near term," in line with the OBR's forecasts.
As for the impact on BoE interest rate cuts, they say: "we do not think the news sufficient to change our BOE call of sequential 25bp cuts from November, although we think that the risks of a slightly slower pace of easing have risen and we look to next week's MPC meeting and its updated macroeconomic projections".
The pivot of UK fiscal policy towards a higher-tax, higher-spending, higher-investment model "is easy to take a pop at - not least as empirically the relationship between higher taxes and growth is a negative one", says Simon French, chief economist and head of research at Panmure Liberum.
It does represent "a gamble" on the government’s main mission to increase the rate of economic growth, he says, but he asks if anyone can "show me which of the big line items of spending the public would support cuts to", then a political alternative is hard to identify.
Secondly, if the downside risk was a forex/gilt market dislocation, "then that risk was, at least for now, navigated" as yields moved higher in the afternoon session and are close to the nominal levels seen around the infamous Truss/Kwarteng budget, "but the move was an orderly one and sterling remains above its pre-election level" in stark contrast to September 2022.
Thirdly, as others have pointed out, the UK interest rate outlook tightened because of Reeves' announcements, as a fiscal expansion requires tighter monetary policy to maintain an inflation equilibrium.
French says Reeves' evening comments that the Budget is a "one and done fiscal event" is the "right messaging and encouraging - but the government will need a fair slice of luck to achieve it", with one of the big risks being whether or not the new costs for employers causes a hard landing in the labour market.
"The second main risk is that sentiment fails to see this as a clearing event and continues its recent inflection lower...The messaging matters and we will be looking for a change in gear in that regard - starting this weekend."
9.34am: Kainos drops on new profit warning
Kainos Group PLC (LSE:KNOS) is a big faller on the FTSE 250, down 14% as its digital services and Workday services divisions continue to be affected by the macro-economic environment and related delays in client decision-making delays related to the Budget.
Analysts at Panmure Liberum said they had spoken to the CFO and expect consensus revenue forecasts to fall 6% and adjusted PBT by around 18%.
9.22am: BHP clarifies it has not exactly 'moved on'
Anglo American PLC (LSE:AAL) is up 1%, having fallen yesterday, after spring suitor BHP Group Ltd (LSE:BHP, ASX:BHP) quickly backtracked on comments yesterday from its chairman that it had "moved on" from its failed bid.
Most sources reported this as meaning it was no longer interested in making another bid for its mining peer, as the six-month bar on it making another bid ends at the end of November, under the City of London's takeover code (Rule 2.8 for those in the know).
But apparently this is not the case, BHP said in a statement this morning, with the Australian mining giant clarifying that chair Ken MacKenzie's comments "were not intended to be a statement to which Rule 2.8 of the UK City Code applies"...read more
8.59am: European markets all down
The FTSE 100 and 250 are down 0.7% and 0.8%, with European stock markets also in the red.
Germany's DAX and France's CAC 40 indices are both down over 0.5%, with Spain's IBEX and Italy's FTSE MIB down 0.3%.
In bond markets, selling of UK gilts has resumed, with the 10yr gilt yield back up above 4.41%.
"Financial markets continue to digest the details of the UK’s budget, and the news is not good," says market analyst Kathleen Brooks at XTB.
The rise in UK gilt yields means the UK’s budget has "fallen like a lead balloon", she says, with Rachel Reeves announcing one of the largest increases in tax, spending and borrowing in the UK’s budget history, only for the OBR to revise down their long-term growth forecasts.
"For a government that planned to boost growth, they have fallen spectacularly at the first hurdle."
With the pound steady against dollar and euro, Neil Wilson at Finalto says, it was a case of bonds "flexing a bit on the idea of more issuance".
"Seriously, where is the supposed growth? It was a Budget for the NHS, not growth," he says.
Gold and oil prices have come back a touch this morning, with eurozone inflation data the big ticket item for this morning, expected to rise a bit to 1.9% from 1.7% a month ago.
"If it’s short of this it could up the ante on bets for a 50bps cut in December (currently around 10% priced)," says Wilson.
8.48am: Sainsbury's sells Argos cards portfolio
J Sainsbury PLC (LSE:SBRY) has banked £720 million from the sale of its Argos Financial Services cards portfolio to NewDay Group.
The cards portfolio account for around 20% of Argos sales and are held by around two million Argos credit customers.
Sainsbury said the consideration price broadly reflects the expected net value of loan balances and associated provisions when the deal is scheduled to conclude in 2025.
London-based NewDay, which according to its website has £4.3 billion on loan and 3.7 million customers via partnerships with John Lewis and AO, is headed by John Hourican and chaired by Sir Michael Rake...read more
8.37am: Results from Haleon and Coca-Cola
Shares in Haleon PLC (LSE:HLN, NYSE:HLN), the maker of Panadol painkillers, Sensodyne toothpaste and Centrum vitamins, are down 1.6% after it reported a 6.1% organic growth for the third quarter
Currency fluctuations meant the consumer health group saw year-on-year reported revenue fall 0.6% though...read more
Elsewhere, shares in drinks bottler Coca-Cola HBC AG are up 1.7% after it increased its full-year outlook to account for strong recent performance across its key markets...read more
8.25am: Smith & Nephew warns on profits
More details on Smith & Nephew PLC (LSE:SN), where shares in the hip and knee replacement group are down 12% after it slashed full-year revenue outlook to account for a downturn in demand and pricing pressures in the Chinese market.
The group now expects full-year revenue growth of 4.5%, compared to 5-6% previously, with challenges in China largely driven by the ongoing effects of the country’s 'value-based procurement' programme, which has impacted pricing for surgical products without corresponding increases in sales volume.
Additionally, S+N's orthopaedics arm saw lower in-market demand, slowing orders as distributors reduced their inventory levels...read more
8.13am: FTSE opens sharply lower, falls across the board
The FTSE 100 has dropped 42 points or 0.5% at the open to 8,118, with the FTSE 250 also falling 0.4%.
It's a broad retreat, with only eight of the blue-chip index in the green.
Biggest faller is Smith & Nephew PLC (LSE:SN), down 10% as it lowered its full-year outlook, primarily due to the impact of China headwinds.
Scottish Mortgage Investment Trust PLC (LSE:SMT) is down 1.6% after the falls in US tech overnight.
Shell PLC (LSE:SHEL, NYSE:SHEL) is up 0.9% after its quarterly results saw it rinse and repeat with its dividend and buybacks.
7.58am: Ocado new chair appointment points at new direction
Ocado Group PLC (LSE:OCDO) has appointed IT and consulting veteran Adam Warby to be its new chairman.
He will join the board as an independent non-executive director from tomorrow, 1 November, before assuming the role of chair on 1 December, when current chair, Rick Haythornthwaite, will step down from the board after four years at the head of the table.
Warby is currently chair of Nasdaq-listed headhunting firm Heidrick & Struggles, having previous been chair of Swiss-based SoftwareOne software advice provider and a founder member and CEO of IT consulting and services provider Avanade Corporation.
Tim Steiner, Ocado's chief executive, says Warby would help the company to "expand the scope and reach of our technology into new markets and sectors"...read more
7.46am: US big tech in focus
For the many UK investors in US stocks, earnings from Microsoft Corp (NASDAQ:MSFT) and Instagram owner Meta Platforms Inc (NASDAQ:META, ETR:FB2A, SWX:FB) were published overnight, with both stocks down more than 3% in post-market trading.
This was despite Microsoft reporting better earnings than expected for its fiscal first-quarter, with the standout performer being its cloud segment, while there was a slight decline in profit margins reflecting increased investments in research and development.
Meta Platforms turned in results for the third quarter that strongly beat Wall Street estimates but said the new quarter would be below forecasts.
7.29am: Shell adds another share buyback as profits fall less than expected
This morning's corporate results are dominated by Shell PLC (LSE:SHEL, NYSE:SHEL), the second largest company in the FTSE 100, which has unveiled a smaller decline in third-quarter profits than expected and announced a new $3.5 billion share buyback.
The oil and gas supermajor reported quarterly adjusted profits of just over $6 billion, down 4% from the second quarter and compared to a year ago, but around 12% better than the average forecast.
Free cash flow of $10.8 billion was up around $650 on the previous quarter and $3 billion versus a year ago.
Shell paid $5.7 billion of shareholder distributions in the quarter, with $3.5 billion spent on the share buyback declared for the second quarter and $2.2 billion on dividends, and the same dividend of $0.3440 per share and buyback were declared for the third quarter.
7.15am: FTSE to extend losses
FTSE 100 futures are pointing to another day on the back foot for London's blue-chip benchmark, as Rachel Reeves' Budget continues to be digested.
A fall of around 20 points is being called in pre-market trading, further subtracting from the 60 points lost yesterday that saw the index close at just under 8,160, the lowest since 9 August.
The bond market's mulling of Reeves' Budget continued, with gilts rising sharply afterwards before easing back a little and remaining there overnight.
Also overnight, US stocks slid lower, with the tech-heavy Nasdaq leading the way, down 0.6%, while the S&P 500 fell 0.3% and the Dow Jones dropping 0.2%.
This was on the back of a rout for semiconductor companies, with the Philadelphia semiconductor index falling 3.35%, sparked by Advanced Micro Devices falling 11% on underwhelming results and server maker Super Micro Computer plunging 33% after its auditor resigned, citing “integrity” concerns.
Asian markets are mixed, with Japan and India down, but Hong Kong and China up.
In corporate results, Shell and Haleon are among the reporters in London this morning, and after the US market closes this evening, Apple and Amazon will be in the spotlight.