- FTSE 100 up 23 points at 9,426
- UK public deficit climbs to highest in five years
- Unilever pushes back ice cream split
4.42pm: Stocks edge higher
The FTSE 100 ended Tuesday’s session higher, adding 23 points at 9,426.
Caution persisted across markets ahead of more earnings reports due Tuesday, notably Netflix’s report, which is due after US markets close.
“Tuesday hasn’t seen the kind of solid price action we saw on Monday, no doubt as investors hold their breath ahead of Netflix’s earnings,” IG chief market analyst Chris Beauchamp said.
“The crash calls have only grown louder in recent months, but as the Apple upgrade showed yesterday, Big Tech retains its power to deliver the goods for investors.”
3.40pm: Gold price drags on FTSE
The price of gold is tumbling. It was up at almost $4,380 per oz last night, and has plunged over $200 or 5.9%.
At $4,122 now, it's only wiped off the gains in the past week, but that's stil the biggest one-day drop in five years.
This unwinding of the price, with silver also dropping even more sharply, down 7.8% is pretty abrupt.
There has been "no single event that has caused today’s sell off," says Kathleen Brooks at XTB.
"Instead it is most likely caused by a confluence of factors including stretched valuations and signs that US CPI, which will be released at the end of this week, could come in softer than expected."
The risk, she adds, is that the precious metals sell-off "infects" other asset classes, with gold and stocks having moved in tandem to both hit various record highs in recent months.
European and US stock indices are mixed, with the FTSE and DAX up 0.1%-0.2% and the Dow Jones also in the green.
Precious metals miners Fresnillo PLC (LSE:FRES), Hochschild Mining PLC (LSE:HOC, OTCQX:HCHDF) and Endeavour Mining PLC (LSE:EDV, TSX:EDV, OTCQX:EDVMF) are holding back the FTSE 100 and 250, with falls of between 10% and 15%.
"If this sell off continues then we could see the FSTE 100 come under pressure," Brooks says.
"If this is a prolonged sell off, then the FTSE 100 could be at risk, since Endeavour and Fresnillo have both risen by 270% and 130% respectively, so far this year. Thus, the focus will be on how far the gold price can fall."
2.51pm: Wall Street mixed open
A mixed open on Wall Street, with the Dow Jones up 31 points or less than 0.1%, while the S&P 500 is just over fiove points to the bad, down less than 0.1% and the Nasdaq has started with a 0.25% decline.
Worst is the small cap Russell 2000, which is down 0.6%, reversing some of its gains from the day before, when it was out in front.
General Motors and Warner Bros Discovery are both up over 10%, as the top of the S&P leaderboard.
WBD has launched a strategic review in light of recent takeover interest, with chief executive David Zaslav seeking to fend off 'unsolicited' takeover interest.
1.42pm: Tax expert wants corporate tax cuts
Some doubts have been cast over Rachel Reeves' plan to apparently save businesses £6 billion by scrapping paperwork "dressed up as an economic growth plan".
Mark Tan, partner at law firm Spencer West, says: "Businesses aren’t held back by forms - they’re held back by short-term policy swings and the absence of a coherent tax and investment framework."
He says other states are competing by "creating a competitive tax environment for investment and growth", but the UK "seems to believe that growth will come from rewriting its reporting templates".
1.22pm: A bonfire of SME red tape
Rachel Reeves says she will scrap "needless form-filling" for businesses, helping firms save almost £6 billion a year by the end of the parliamentary term.
The Chancellor has been speaking at a regional investment summit in Birmingham, while the Treasury has announced that the "blitz on business bureaucracy" will include reforms to the company merger process and "simpler corporate rules" for small businesses in their submissions to Companies House.
New plans for digital planning checks could also see developers sending photo evidence to authorities online which are then approved using trained AI models.
More than 100,000 SMEs will qualify for simpler corporate reporting rules, with the Treasury suggesting this will mean micro-breweries will no longer have to "account for every hop they buy" and removing the need for family-run cafes to submit lengthy director reports.
A new online map of underground cables and pipes will "help planning officials and builders avoid lengthy and costly delays caused by accidental damage, without having to contact multiple utilities companies".
12.11pm: US stock futures in red, but GM impresses
Wall Street stocks are predicted to start in slightly negative fashion, led by the Nasdaq.
Futures for the tech-heavy exchange are down only 0.1% though, with expected losses for the S&P 500 and Dow Jones even smaller.
Shares in General Motors Company (NYSE:GM), owner of the Chevrolet, Buick and Cadillac brands, are up 9% in premarket trading after it released earnings this morning that were ahead of expectations.
GM also raised its outlook for the full year, helped by a lower expected hit from tariffs.
11.54am: Bond markets and the budget
Next month's Budget could be "seismic" for UK markets, says economist James Smith at ING.
"We think it's more likely to push gilt yields down than up, yet there are several ways – from fiscal rule changes to dubious austerity pledges – which could cause borrowing costs to spike."
Some of this depends on the size of the fiscal gap (£15-£20 billion) due to weaker growth, higher debt costs, and policy reversals, which Smith says leaves little budget flexibility and pressuring her to find credible revenue or spending adjustments.
"A lower amount of headroom, but backed by clear, upfront revenue raisers or spending cuts, would likely be favoured over more headroom that’s achieved only by dubious promises about tax and spending later this decade," says Smith.
Political and practical constraints make spending cuts "near-impossible", as public services remain stretched, so any increased expenditure - even modest - could undermine market confidence if not backed by realistic, credible plans.
The government is expected to focus on targeted, modest tax increases and threshold freezes rather than broad hikes, which markets may accept if they produce near-term, reliable revenue without hurting economic sentiment.
"We suspect markets would like to see a similar degree of front-loading this time. The government faces a choice. Break its election promises and raise income tax, employee NI or VAT. Politically challenging, but where small changes can raise big and predictable sums."
If spending doesn't rise any faster and tax hikes yield significant sums early on, "then investors can expect a material fall in gilt issuance next year," Smith adds.
"We don't think it's fully appreciated that the budget deficit is set to fall noticeably in 2026."
Some of Reeves' tax measures may add to short-term inflation, which Smith says might complicate the Bank of England’s rate-cut plans, though VAT cuts on energy could help offset that pressure in 2026.
Smith thinks "the biggest risk for UK bonds" in the Budget is a change to fiscal rules, as this would be the easiest way of avoiding raising tens of billions of pounds in extra taxes.
The rules are set to change next year anyway, with the Treasury allowed to run a small 0.5%-of-GDP deficit, opening up an extra £17 billion a year of spending power.
"Bringing that forward to this autumn may sound innocuous, but it would likely go hand-in-hand with a material increase in borrowing next year, relative to prior forecasts. We think it would provoke a material rise in gilt yields."
However, Downing Street leaks suggest rule changes in this budget are unlikely.
Finally, Smith notes that political pressure on Starmer and Reeves is mounting, and if that increases into next May’s local elections, the possibility of a leadership challenge from the left of the Labour Party could put renewed upward pressure on gilt yields.
11.32am: Public deficit analysis
There was a "small relief" for Chancellor Rachel Reeves from an upward revision to taxes, as statisticians corrected for an error in HMRC's counting of VAT receipts, adding £2 billion to tax receipts in the first half of the fiscal year.
But economist Elliott Jordan-Doak at Pantheon Macroeconomics says borrowing will hit £126.9 billoin for this whole 2025/26 fiscal year if the current overshoots continue, well above the OBR's March forecast of £117.7 billion.
However, that outlook is "better than last month, reflecting borrowing closer to OBR forecasts now, but the material overshoot still provides a difficult backdrop to the Budget", he says.
Digging into the details of this morning’s release, he pointed out that higher-than-expected borrowing by local authorities explained most of the total borrowing overshoot in September.
Tax receipts were £0.3 billion higher than expected in September, while spending was £1.6 billion lower than the OBR had projected.
Total receipts are now £1.3 billion below profile on a cumulative basis so far this fiscal year, and total spending is cumulatively just £0.2 billion above official projections for the first half of the fiscal year.
"Borrowing is still overshooting the March 2025 forecasts materially and the OBR will likely assume some of that persists in the medium-term, although the fiscal watchdog will likely exercise some caution in projecting forward this year’s overshoot as it comes mainly from revision-prone Local Authority borrowing.
"A more fundamental and bigger problem for the Chancellor will be productivity growth downgrades from the OBR.
"All told, we expect the OBR to say the Chancellor's £9.9 billion of fiscal headroom has turned into a £15 billion hole.
"We think the Chancellor will fill that hole, and aim for a wider £20 billion margin of headroom, in the Budget by raising stealth, sin, pensions and property taxes as well as targeting spending cuts."
11.02am: B&M rebound
Top riser on the FTSE 350 is B&M European Value Retail SA (LSE:BME), with the shares up 3.6% to just eclipse Segro, a day after its second profit warning in a fortnight saw the shares plummet 24% yesterday.
Analyst Andrew Wade at Jefferies notes that B&M said it still expects that its UK business can stabilise EBITDA margin at a low-double-digit percentage level in the medium term.
But he says it is "very poor optics for B&M, and an update that erodes trust further, highlighting potential issues in accounting controls and higher-level analytical review/oversight", which had led to the departure of its CFO.
"And that is before we unpick how a £7 million Q2 miss translates into a £40m FY downgrade."
Ben Hunt at Panmure Liberum said "we are not concerned that underlying trading is further deteriorating" but reduced his EBITDA forecasts and target price by 9%, while maintaining dividend forecasts given the strong balance sheet and robust cash generation.
10.35am: Indecisive markets
European markets have "kicked off on a somewhat indecisive tone", says market analyst Josh Mahony at Scope Markets.
Fiscal concerns are dominating headlines not just in the UK, where public sector borrowing figures add pressure on Chancellor Rachel Reeves ahead of next month’s autumn budget, but also in France.
S&P Global has downgraded the French sovereign credit rating to A+ from AA-, citing persistent fiscal strains and weak deficit reduction progress.
"Setting the two narratives against each other, there is clearly an ongoing narrative around fiscal instability and soaring debt levels that is not just a US-centric issue," says Mahony.
He flags that the US federal government shutdown moves into its 21st day, marking the third-longest closure in American history.
The shutdown is shaving around $15 billion off GDP each week.
Between the shutdown, last week's regional bank wobbles, and ongoing questions about US-China relations, US futures are currently pointing towards a very mildly downbeat open.
Yesterday’s deal for the US to obtain rare earth from Australian sources "may seek to reduce their reliance on Chinese imports, but ultimately that is unlikely to make a dent given speed and volumes currently required by the US," says Mahony.
"Meanwhile, bipartisan talks over spending and the debt ceiling are expected to intensify this week, with investors closely monitoring developments for potential spillover effects into financial markets."
9.37am: Coca-Cola Hellenic to buy Africa's largest Coke bottler
Shares in Coca-Cola HBC AG (LSE:CCH) dropped over 4% in early trading after it struck a deal to acquire 75% of the largest Coca-Cola bottler in Africa for $2.6 billion (£1.94bn) to make it the second-largest drinks bottler in the world, but funded in part by an issue of new shares.
Coca-Cola Beverages Africa (CCBA), currently owned by The Coca-Cola Company (NYSE:KO) and the South Africa-based Gutsche family, operates in 14 African countries, producing around 40% of the continent’s sales volumes of the US soft drink giant.
Earnings per share are expected to benefit from a "low single-digit" accretion from the first full year after completion, which is targeted by the end of 2026.
Coca-Cola Hellenic said it will fund the acquisition through a combination of bridge financing and issuing new shares representing around 5.5% of its current share capital, with a secondary listing on the Johannesburg Stock Exchange planned.
9.04am: Japan spotlight
The FTSE 100 and European mainland stock markets are all up solidly, over 0.3% in London and Madrid, lower elsewhere.
Segro has been joined by some other REITs among the risers, with HSBC followed by some other lenders, with utilities also catching a bid.
Japanese equities earlier rallied to a fresh record as Sanae Takaichi was confirmed as Japan’s first female prime minister.
The Nikkei 225 nearly hit 50k for the first time before paring gains on the session to finish just 0.15% higher.
Takaichi is credited as being "a ‘fiscal dove’ and for stimulus measures to boost the economy," says Neil Wilson at Saxo.
Takaichi is expected to cut taxes and boost defense spending, while her dovishness means she is not a fan of interest rate hikes.
She is expected to appoint Satsuki Katayama as finance minister, local media is reporting, which would also make the protege of former conservative Prime Minister Shinzo Abe the first woman to be appointed to that post, too.
Before becoming a politician, Takaichi was a heavy metal drummer, a scuba diver and briefly a television host.
8.36am: Pound drops on debt 'doom loop'
The pound dropped after the UK borrowing figures.
Borrowing since the tax year started in April has reached £99.8 billion, up £11.5 billion more than the same period in 2024, and the second highest borrowing figure for this period since records began.
Public sector net debt excluding public sector banks was 95.3% of GDP, 1% more than at the end of September 2024, and the highest level since the 1960s.
The government’s new calculation of the public sector debt, which measures public sector net financial liabilities, was 83.8% of GDP, 3% higher than a year ago.
"This is adding pressure to Rachel Reeves ahead of next month’s budget," says market analyst Kathleen Brooks at XTB.
"She said after last year’s budget that she didn’t want to come back for more borrowing or more tax rises. She has already done the latter, borrowing has exploded this year, and she is expected to do the latter and raise tax at next month’s budget."
"To fix the public finances and get the economy onto a more secure footing, the government needs to employ fiscal consolidation measures. The UK may not be in France’s situation yet, but it is getting close."
She notes that the UK’s budget deficit was 5.38% in Q2, compared to 5.8% for France making the two "the fiscally sick men of Europe".
One reason for the surge in borrowing last month is a 66% increase in debt interest payments to £9.7 billion, Brooks notes, which was a result of the surge in the retail price index in July, which increased the cost of servicing inflation-linked bonds, "a debt doom loop".
"The way out of this is not easy, but it does require getting professionals into the Treasury to restructure and manage the inflation-linked portion of UK government debt, because this is causing a huge fiscal burden and it could also turn into a political problem for the UK."
The pound dropped versus the US dollar to below $1.34, back where it was last Wednesday.
8.15am: FTSE 100 starts higher, Segro at top
The FTSE 100 has opened almost 34 points higher at 9,437.4.
Segro PLC (LSE:SGRO) is top of the leaderboard, up 3.5% as the warehouse, industrial and data centre developer reporting an uptick in rent and momentum in its development programme.
HSBC Holdings PLC (LSE:HSBA) is next, up 1.5%. The FT is reporting that a former NatWest executive has been tapped up to lead its UK business, while Barclays analysts have upped their target price on the shares.
7.49am: AWS says all working normally now
By the way, all your websites should have started working properly last night, as Amazon Web Services (AWS) said it had resolved its massive outage.
User outages topped 11 million around the world, according to Downdetector.
IT experts said the outage showed how dangerous it is having so many companies rely on a single provider.
7.36am: Unilever's ice cream split pushed back
Unilever PLC (LSE:ULVR) has pushed back the demerger of its ice cream business becuase of the US government shutdown.
The FTSE 100 group says it is revising its timetable as the shutdown extends to the US financial regulator but is still confident that the demerger will happen by the end of the calendar year.
Previously, the shares were expected to list in Amsterdam, London and New York in mid-November.
7.16am: FTSE 100 called higher, UK borrowing at five year high
The FTSE 100 is expected to open higher on Tuesday despite new data showing UK government borrowing swelling further.
On the futures market, the prediction is that 15 points will be added in inital trades for the London index, which added 49 points to close at 9,403.57 yesterday.
On Wall Street overnight, the three main stock indices all finished over 1% higher, led by the tech-dominant Nasdaq.
Asian markets are mostly in green this morning, led by markets in Hong Kong and mainland China, also both up over 1%.
As for the UK public sector net borrowing, this was was £20.2 billion in September, up £1.6 billion on the same month a year ago.
ONS chief economist Grant Fitzner said it was the highest September borrowing for five years, with the first six months of the financial year seeing the highest overall deficit since 2020.
"Debt interest, the cost of providing public services and benefits all increased compared with last year, more than offsetting the rise in receipts from central government taxes and National Insurance contributions," he said.