On Wednesday, London’s FTSE 100 experienced a decline as investors grappled with increasing fiscal apprehensions, highlighting persistent inflation and the possibility of tax increases by the UK government, all while processing a varied set of corporate announcements. The benchmark FTSE 100 was down 0.5% by 1013, while the domestically focused FTSE 250 was up 0.13%.
On Tuesday, the International Monetary Fund made a modest upward adjustment to its growth forecast for Britain for the current year, while revising it downward for 2026. The Bank of England must exercise “very cautious” judgment regarding potential future rate cuts, given that the nation’s inflation is anticipated to reach the highest levels among the Group of Seven advanced economies in both 2025 and 2026. In the interim, Britain’s finance minister Rachel Reeves indicated that she was considering both tax increases and reductions in spending for her budget scheduled on November 26.
Expectations among economists indicate that Reeves will require approximately 30 billion pounds through tax increases in the upcoming budget. This necessity arises following an unexpected rise in government borrowing costs, the abandonment of a plan to reduce welfare expenditures, and indications that growth forecasts may need to be revised downward. In the market, LVMH, a bellwether for the luxury sector, reported better-than-expected sales in the third quarter, which positively impacted other luxury stocks. UK’s Burberry opens new tab rose 6.6% to the top of the FTSE 100 while the broader personal goods sector opens new tab outperformed peers by a 6.2% gain.
IAG opens new tab rose 1.3% after Morgan Stanley initiated coverage on British Airways and Iberia owner with a “overweight” rating, citing its lead among European airlines in profitability and cash returns. PageGroup rose 7.2% to the top of the FTSE 250 after the recruiter posted third-quarter results that beat profit expectations. On the flip side, Entain fell to the bottom of the FTSE 100, down 3.3%, after the British gambling firm reported a slowdown in gaming revenue in the third quarter. An index of healthcare stocks opens new tab led sectoral declines with a 1.9% fall. Drugmaker AstraZeneca slipped 2.3%.