Budget taken calmly by markets

The main event this week was the Autumn Budget presented by Chancellor Rachel Reeves, which markets took in their stride. US markets were closed on Thursday for the Thanksgiving holiday and the third-quarter earnings season is starting to wind down as we head into December. 

The FTSE 100 was up 1.7% over the week by mid-session on Friday, with the more UK-focused FTSE 250 trading 3.3% ahead.

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Donald Trump

Donald Trump ramped up his foreign policy agenda, deploying a US carrier strike group to the Caribbean to pressure Venezuela and authorising covert operations against Nicolás Maduro, while signalling readiness for military options. He doubled down on tariffs, touting renewed Chinese soybean purchases and warning of further trade measures under his “America First” strategy. Immigration plans leaked, revealing a review of refugee admissions and a freeze on green card applications for nearly 200,000 people. He also advanced Ukraine peace talks, dispatching envoys to Moscow and Kyiv to push for a deal.

Autumn Budget

Chancellor Rachel Reeves’ Autumn budget unveiled a £26bn package of tax rises aimed at high earners and property owners, including a new annual levy on homes worth over £2m, higher rates on property, savings and dividend income, and an extended freeze on personal tax thresholds to 2030. The measures, designed to double fiscal headroom to £22bn and fund welfare commitments such as scrapping the two-child benefit cap, were largely backloaded, with most changes taking effect from 2027 onwards. Markets reacted calmly after an initial wobble caused by an unprecedented Office for Budget Responsibility (OBR) leak before the speech: gilt yields fell then stabilised, sterling firmed, and UK equities ended higher, with the FTSE 100 up around 0.7%, as investors welcomed clarity and a less severe package than feared. 

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Economics

The Federal Reserve’s latest Beige Book painted a picture of an economy that is “little changed” overall, with signs of cooling in the labour market and softer consumer spending, while price pressures remain moderate. About half of the Fed’s 12 districts reported weaker demand for workers, with firms favouring hiring freezes and attrition over layoffs, and some cutting hours instead of jobs. Consumer spending declined further, particularly among middle-income households, though high-end retail held up, and businesses flagged rising input costs linked to tariffs. The report matters because it offers policymakers anecdotal insights ahead of the December FOMC meeting, especially after recent data gaps caused by the government shutdown. Its tone suggests the Fed faces a delicate balance: slowing growth and cautious sentiment point to scope for rate cuts, but persistent inflation risks could keep policy on hold, leaving markets braced for continued uncertainty. 

US consumer confidence fell sharply in November, with the Conference Board index dropping to 88.7 from 95.5 in October, its lowest level since April and well below economists’ forecast of 93.3. The Present Situation Index slid to 126.9, while the Expectations Index – a key gauge of the future – fell to 63.2, marking its tenth consecutive month below the recession-warning threshold of 80. Consumers grew more pessimistic about business conditions, jobs and income prospects, citing inflation, tariffs, political uncertainty and the recent government shutdown as major concerns. 

Germany’s economy flatlined in the third quarter, with GDP unchanged from the previous quarter after seasonal and calendar adjustments, confirming the country’s longest period of stagnation since World War II. Year-on-year growth was just 0.3%, as weak exports and a 0.3% drop in household consumption offset modest gains in investment (+0.3%) and government spending (+0.8%). Manufacturing and construction continued to contract, while services offered limited support. Analysts warn that structural challenges and geopolitical uncertainty will keep growth subdued into year-end, though fiscal stimulus planned for 2026 may provide some relief. 

Companies

Short-haul carrier easyJet posted a 9% rise in annual pre-tax profit to £665m, with revenue up 9% to £10.1bn, driven by strong demand and the rapid growth of its holidays arm, which delivered £250m profit and hit its medium-term target ahead of schedule. Headline operating profit climbed 18% to £703m, while passenger numbers rose 4.2% to 93.4m and load factor improved to 89.8. Looking ahead, easyJet plans moderate capacity growth of about 3% and aims to lift holidays profit to £450m by 2030, reaffirming its ambition to exceed £1bn in group pre-tax profit in the medium term. 

Beazley reported muted growth in its third-quarter trading update, with gross written premiums up just 1% year-on-year to $4.67bn and net premiums rising 4% to $3.93bn, as competitive conditions and falling renewal rates weighed on performance. Cyber risks were the main drag, with premiums down 8% amid persistent US pricing pressure, while property and specialty lines saw modest gains. The insurer cut its 2025 premium growth outlook to flat-to-low single digits. Investment income slipped to $458m from $513m a year earlier, though returns remained positive at 3.9%. 

Compass Group delivered another strong year, with revenue up 9.7% to $46.1bn and underlying operating profit rising 11.7% to $3.34bn, driven by organic growth of 8.7% and robust performances in North America and international markets. Margins edged higher to 7.2%, reaching 7.3% in the second half, while net new business growth of 4.5% and client retention above 96% underpinned results. Looking ahead, Compass expects underlying operating profit growth of about 10% in 2026, supported by 7% organic revenue growth, M&A contributions and continued margin progression. 

Kingfisher delivered a resilient third quarter, with group sales edging up 1% to £3.25bn and like-for-like growth of 0.9%, driven by strong UK and Ireland performance where sales rose 3% as B&Q and Screwfix gained market share. Trade and e-commerce channels continued to expand, with trade sales up 12.1% and online penetration reaching 20.7%, while core and big-ticket categories showed growth despite softer seasonal demand. France and Poland remained weak, posting LFL declines of 2.5% and 1.3% respectively amid subdued consumer sentiment. The group upgraded its full-year adjusted pre-tax profit guidance to £540m–£570m from £480m–£540m, citing cost discipline and strategic progress, and confirmed its £300m share buyback programme is on track, with £175m already completed. 

Halfords posted a solid first-half performance, with revenue up 3.3% to £893.3m and like-for-like sales rising 4.1%, driven by strong growth in cycling (+9%) and steady gains in retail and autocentres. Strategic initiatives advanced, with 79 Fusion garages now operating toward a 150-site target and the Halfords Motoring Club reaching around 6m members, including 400,000 paid subscribers generating £20m annually. Despite inflationary cost pressures, management reaffirmed full-year guidance and highlighted technology and data upgrades as key priorities for future growth. 

Pennon swung back to profit in the first half of 2025/26, posting statutory pre-tax earnings of £65.9m compared with a £38.8m loss a year earlier, as revenue jumped 25% to £658.1m on tariff increases and strong summer demand. Underlying EBITDA surged 56% to £254.4m, while adjusted EPS rebounded to 14p, signalling progress in the new K8 regulatory period. Capital expenditure remained high at £304.8m as the group accelerated investment in water infrastructure, though the interim dividend was cut by nearly a quarter to 9.26p following last year’s rights issue. 

HP reported fourth-quarter revenue of $14.6bn, up 4.2% year-on-year, as growth in personal systems and AI-powered PCs offset softness in printing. Adjusted earnings per share came in at $0.93, down from $0.96 a year earlier, while GAAP EPS fell to $0.84. Looking ahead, HP guided for first-quarter adjusted EPS of $0.73–$0.81 and announced a restructuring plan to cut 4,000–6,000 jobs by 2028, targeting $1bn in cost savings as it doubles down on AI innovation amid rising component costs. 

Dell posted record third-quarter revenue of $27bn, up 11% year-on-year, with adjusted earnings per share of $2.59 beating forecasts, as surging demand for AI-optimised servers drove growth. Infrastructure Solutions Group revenue jumped 24% to $14.1bn, including a 37% rise in servers and networking, while Client Solutions Group edged up 3% to $12.5bn, though consumer sales fell 7%. AI momentum was the standout, with $12.3bn in server orders during the quarter and $30bn year-to-date, prompting Dell to lift full-year guidance to $111.7bn in revenue and $9.92 EPS, alongside a forecast for $25bn in AI server shipments. The group returned $1.6bn to shareholders and expects fourth-quarter revenue of up to $32bn, signalling continued strength despite margin pressures in PCs.