The FTSE 100 looks set to open slightly lower on Thursday, easing off the strong gains made after the UK chancellor delivered her latest budget.
Early indications suggest a calm but cautious start for the London stock market, with traders digesting the government’s new fiscal measures and the pound’s recent rise.
According to IG’s early forecasts, the UK’s blue-chip index is expected to drop by around 12 points at the open, slipping to approximately 9,679.
This follows Wednesday’s upbeat session, where the index climbed nearly 1% as investors initially welcomed the budget announcement.
Sterling Pushes Higher as Markets Absorb Budget Details
The pound continued to push advanced on Thursday morning, trading around USD 1.3249 and briefly reaching USD 1.3268, its strongest position in nearly a month. The euro weakened hardly against the dollar, while the note also dipped against the yen.
The stronger sterling exchange rate reflects a cautiously positive response to the chancellor’s decision to take a firmer stance on public finances.
Wednesday’s budget confirmed a £26 billion package of tax increases, largely achieved through frozen income tax thresholds, changes to salary sacrifice schemes, and smaller targeted adjustments.
Chancellor Rachel Reeves expressed frustration at the Office for Budget Responsibility after its forecasts were released unusually early, describing the move as “deeply disappointing and a serious error on their part.”
Markets React to Reeves’ Budget
While the budget sparked mixed political debate, financial analysts took a largely measured view.
Michael Pfister at Commerzbank noted that the government’s available fiscal headroom for 2029/30 had expanded to £22 billion, a sizeable jump from the earlier estimate of £9.9 billion.
He added that the tax hikes, while significant, were not expected to add fuel to inflation.
He also pointed out that the OBR’s revised growth projections now look “much more realistic,” which should limit the risk of more drastic future corrections.
Markets seemed to agree, with UK gilt yields falling after the announcement and the pound ending Wednesday slightly firmer.
However, Pfister also highlighted one ongoing concern: a large portion of the planned savings is scheduled for after 2029, when a general election is already looming, raising doubts over whether future governments will actually deliver on them.
Global Market Mood Remains Upbeat
Sentiment was brighter across global requests. In the US, the Dow Jones, S&P 500, and Nasdaq all posted solid earnings ahead of the Thanksgiving vacation.
Pepperstone critic Michael Brown said requests had enjoyed another “risk-on” session, with major indicators recovering from recent dips.
He added: “It feels a little early to call it a Santa Rally, but momentum into year-end is certainly picking up.”
Asian markets carried that optimism into Thursday, with Japan’s Nikkei 225 up more than 1% and both the Shanghai Composite and Hang Seng also edging higher. Australia’s ASX 200 recorded more modest gains.
Other Market Moves
US Treasury yields slipped slightly overnight, with the benchmark 10-year falling just below 4%.
Commodity markets were fairly muted too, with Brent crude dipping to around USD62.19, while gold prices softened to roughly USD4,156 an ounce.
With US markets closed today for Thanksgiving, trading volumes in Europe may be thinner. Closer to home, investors will be paying attention to eurozone consumer confidence data, along with corporate updates from Halfords and Pennon Group, which could provide extra colour on the health of UK retail and utilities.
