All eyes are on Westminster this morning as Chancellor Rachel Reeves prepares to deliver her highly anticipated second Autumn Budget. Financial markets are braced for significant announcements, with the government seeking to raise tens of billions to fill a substantial fiscal hole.
Market Movements and Sterling Jitters
Despite the pre-Budget anxiety, the FTSE 100 index closed yesterday up 0.8 per cent at 9,609.53p. This rally was largely driven by a strong performance from UK banking stocks. NatWest saw its shares climb 3.57 per cent to 603.80p, while Lloyds Banking Group rose 3.78 per cent to 90.68p.
However, beneath the surface, investors are sending stark warnings. Fresh trading data reveals a dramatic shift in sentiment towards the pound. The volume of put options, which profit when sterling's value falls, has drastically outpaced call options, which profit from a rise, by a ratio of four-to-one over the past week. This imbalance indicates that traders are actively betting on a decline in the UK currency following the Budget announcement.
The Tax Speculation and Banking Reprieve
The lead-up to the Budget has been characterised by intense speculation over which taxes the Chancellor will target. After what was described as a 'hokey cokey' of policy rumours, banks appear to have been granted a temporary reprieve from an immediate tax raid, a move that has been welcomed in the City of London.
Until Chancellor Reeves steps up to the Dispatch Box, the exact nature and scale of the tax changes remain uncertain. The government's need to plug a massive fiscal shortfall means that significant revenue-raising measures are expected.
What Else to Watch Today
Beyond the Budget, the markets will be digesting corporate results from Pets at Home and a handful of earnings updates from small-cap companies. The day's events will be covered in full, including any corporate announcements made amidst the Budget noise.
Yesterday's top stories set the stage for today's events, covering topics from the potential FTSE 100 demotion of Easyjet and the departure of Domino's boss to delays in the Building Safety Act impacting commercial real estate confidence.
