UK Budget Tensions Rise, Tech Giants Post Earnings Surges

Investors await the UK's first Labour budget in over a decade, with the British pound steady near $1.30 as markets eye potential policy shifts. Alphabet boosted tech optimism after reporting better-than-expected earnings, while Meta and Microsoft are set to release results later today. Meanwhile, US Q3 GDP is expected to show strong consumer spending as Europe continues to face growth challenges.

Equities

The FTSE 100 dropped 0.8% on Tuesday, largely impacted by losses in the energy sector, as BP's shares fell 5% following a 30% dip in its third-quarter profit to $2.3 billion due to weaker refining margins and oil trading outcomes. Rolls-Royce Holdings also saw a 1.4% decline, contributing to a 1.2% slide in the aerospace and defence sector. Meanwhile, HSBC led gains in the banking sector, rising 3.1% after reporting stronger-than-expected third-quarter profits driven by its wealth and wholesale banking divisions.

British education company Pearson climbed 3.6% on the back of a 5% rise in quarterly sales, boosted by its assessment and qualifications segment. Investors also turned their focus to the upcoming UK budget announcement, with expectations that Finance Minister Rachel Reeves will address the fiscal outlook without introducing major tax increases.

In the US, the Nasdaq closed at a record high, advancing 0.78% to 18,712.75, while the S&P 500 rose 0.16% to 5,832.97. The Dow, however, slipped 0.36% to 42,233.05 as market participants reviewed a wave of corporate earnings. Alphabet, part of the influential "Magnificent Seven" tech stocks, reported better-than-expected quarterly revenue, boosting confidence in the technology and AI sectors.

VF Corp shares surged 27% after the apparel company reported its first profit in two quarters, while D.R. Horton’s shares dropped 7.2% after the homebuilder forecasted revenue below estimates for 2025, leading to a 2.5% drop in the PHLX Housing index. Ford also saw a notable drop, with an 8.4% decline in its stock price after stating it anticipated reaching the lower end of its annual profit forecast.

Additional economic data showed US job openings reached 7.44 million in September, below estimates of 8 million, while consumer confidence reached 108.7 in October, topping expectations. The communication services sector, including Alphabet and Meta, led gains with a 0.78% rise, while utilities saw a 2.1% drop as the US 10-year Treasury yield climbed to 4.3%, the highest since early July.

Forex & Commodities

The US dollar reached a three-month high against the yen, trading at 153.47 yen as anticipation builds for the upcoming US election and Federal Reserve data releases. The dollar is on track for its strongest monthly gain in 2.5 years, with the dollar index now at 104.34. Sterling held steady, edging up 0.26% to $1.3006 ahead of the Labour government’s first budget, in which fiscal measures to address the UK's financial outlook are expected. The euro traded near flat at $1.0815 against the dollar, while the Chinese yuan showed little movement at 7.15 in the offshore market despite anticipated stimulus measures from Beijing.

Gold rallied to a record high of $2,784.82 per ounce, supported by concerns over a close US presidential race. Bitcoin approached its peak at $73,803.25, fuelled by market sentiment favouring Republican candidate Donald Trump, who is seen as more supportive of digital assets.

Oil prices rose slightly, with Brent crude futures up 0.5% to $71.70 a barrel and US West Texas Intermediate climbing 0.6% to $67.83. This followed an unexpected draw in US crude inventories, down by 573,000 barrels for the week ending October 25, contrasting with expectations of a rise.