On Wednesday, 26th November, markets finally saw the long-anticipated UK Autumn Budget—a key event that had been surrounded by a sense of uncertainty. The budget introduced 88 measures in total, with several notable changes: income tax and national insurance thresholds will remain frozen for three years from 2028; both basic and higher property tax rates will rise by 2%; the national living wage will increase by 50p; and a new duty of 3p per mile will apply to electric vehicles.
An hour before the budget was due to be announced in the House of Commons, it was unexpectedly leaked on the Office for Budget Responsibility (OBR) website, sparking anger across Parliament. In the run-up to the announcement, speculation was rife as many attempted to predict which direction Chancellor Reeves would take. According to the OBR’s report, growth is projected to rise by 1.5% this year, higher than initial forecasts, though the outlook from 2026 has been downgraded, painting a bleaker picture. Inflation is also expected to run hotter than previously anticipated.
Chancellor Reeves emphasised “choices” as the central theme of her budget. Key decisions included avoiding austerity while focusing on tax adjustments, reducing NHS waiting lists, and easing the cost of living. The absence of highly controversial measures appeared to reassure markets, as reflected in muted bond market reactions and a strong close for UK equities: the FTSE 100 rose 0.85%, while the FTSE 250 mid-cap index gained 1.1%, a positive reflection for domestically focused stocks.
Remaining in Europe, ECB policymaker Mr Kazaks shared his outlook on the future rate path. The ECB has held interest rates steady for three consecutive meetings, satisfied with inflation hovering near the 2% target despite concerns of reacceleration linked to US tariffs. Kazaks reiterated that now is not the time to cut rates, citing resilient economic growth supported by government spending across the region. However, he warned of a “fragile equilibrium,” with downside risks stemming from geopolitical tensions and trade policies that continue to weigh on exports and manufacturing.
In the US, economic data releases remain delayed following the longest government shutdown in history. September retail sales rose by 0.2%, signalling a modest slowdown in consumer spending after a strong summer. Part of the increase was driven by higher prices, with petrol station receipts up 2%. Conversely, sales of sporting goods and hobbies fell sharply, down 2.5% month-on-month. A key takeaway is that spending was concentrated among higher-income households, while middle and lower-income consumers adopted a more cautious approach. This divergence underscores a K-shaped economy, where wealth inequality continues to widen and benefits remain concentrated among the wealthy.
Reducing the labour force within the US Government was a task handed to the newly created Department of Government Efficiency (D.O.G.E) at the beginning of the year, led by Elon Musk, X owner and Tesla CEO. Musk lasted just five months in the role before a feud with the US President prompted his departure, and it was announced this week that the department has been terminated. D.O.G.E had made bold claims of cutting tens of billions of dollars in waste and fraud, but these assertions remain unverifiable as no public accounting of its work was ever released.
On Tuesday, HP announced plans to cut approximately 4,000 to 6,000 jobs globally by 2028 as part of a broader strategy to integrate artificial intelligence (AI) into product development and boost productivity. CEO Enrique Lores stated that the initiative is expected to “create $1 billion in gross run-rate savings” over the next three years. HP shares rose more than 5.5% for the week following the news, though they remain down 26% year-to-date.
This week saw markets regain ground after weakness for much of November. The gains were widespread – global equities, government bonds and precious metals all rallied. Within government bonds we saw the headline yield on the 10-year US treasury bond dip below 4%, while UK government bond assets have rallied in both the run up to and subsequent days of the budget. Next week ushers in December, with investors hoping the fabled Santa Rally can help propel equities to new highs.
Nathan Amaning, Investment Analyst
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