UK fiscal moves and global rally signals

Market update

Global equities rallied over the holiday‑shortened week, led by the US equities which rose +2.6%, helped by dovish signals from Fed officials and softer data that nudged markets to price a high probability of a December rate cut; small caps outperformed their larger counterparts, while AI‑valuation jitters eased temporarily during the week's rebound. In the UK, the equity market posted a weekly gain of +1.9%Sentiment improved as investors digested the Autumn Budget and a tax‑heavy path that was received as fiscally credible, while energy and financials led sector gains late in the week. Continental European equities consolidated prior gains on growing conviction that the Fed will cut rates next month, as well as having some companies specific gains in the technology, defence sectors and corporate movers such as Puma. EU equities experienced an increase of +2.2% topping a month which has been choppy given swings in AI‑exposed names and defence stocks. Japanese equities advanced +1.4% on the week as dip‑buyers returned and Tokyo core inflation kept BoJ‑hike speculation alive, supporting a constructive earnings backdrop even though November was weaker overall, tech supply‑chain names were among the notable gainers. Emerging markets ended the period +1.2% higher, with greatest contributors being Taiwan and China (which increased by +3.6% and +1.2% respectively).

US Treasury yields fell by –5 basis points, as weaker labour‑market signals and delayed inflation prints reinforced expectations for another Fed cut in December. In the UK, gilts fell by –10 basis points after the Autumn Budget, as investors seemed to welcome increased fiscal headroom and back‑loaded tax measures that reduced near‑term issuance pressure, while markets continued to price a high probability of a December BoE cut amid easing inflation.

Gold gained +2.9% over the week, as rate‑cut bets firmed and safe‑haven demand stayed resilient in the face of mixed global data. Oil fell by -1.5%, reflecting oversupply concerns, smaller‑than‑hoped US inventory draws, and headlines suggesting progress toward a Russia-Ukraine peace framework that could ultimately increase available barrels.

Economic update

UK autumn budget. Chancellor Rachel Reeves presented a Budget aimed at delivering “fair taxes, strong public services and a stable economy”. The main points are summarise bellow:

• Income tax and national insurance thresholds stay unchanged until 2030–31. Expected to pull many into higher tax bands via fiscal drag.
• Salary sacrifice pension contributions will be capped at £2,000 before national insurance applies, raising £4.7bn in 2029-30.
• Council tax surcharge will be applied to homes worth more than £2mn.
• Two-child benefit cap will be scrapped.
• Cash Isa allowance to be cut from £20,000 to £12,000 for people under the age of 65.
• Tax rate on dividends, savings and property income to rise by 2%.
• Electric vehicles will be subject to a mileage-based charge.
• Online gaming levy to rise from 21% to 40%. Tobacco duty revenues up by 0.8%.
• Small parcel tax loophole closed, so all parcels from overseas have to pay customs duty.

Main impacts: Fiscal headroom is £22bn, up from £9.9bn in the Spring Statement in March, but still below the 2010-2022 average of £31bn.  Public debt is forecast to rise from 83.1 per cent of GDP this year to a peak of 83.7 per cent in 2028-29, before falling to 83 per cent in 2029-30. Current budget is expected to turn into a surplus by 2028-29.

Economic forecasts. The OBR update its forecasts for growth, inflation and productivity:

Growth is expected to be 1.4% in 2026, down from a forecast of 1.9% in March. But the economy is expected to expand by 1.5% this year, up from a previous estimate of 1%.

Inflation will stand at 3.5% this year, above the 3.2% projected in March. Price growth is expected to be 2.5% in 2026.

Productivity growth is forecast to be 1% over the medium term, 0.3 percentage points below the estimate in March.

Markets reaction: Stronger-than-expected fiscal buffer pushed 10-year gilt yields lower, though absence of immediate tax hikes kept the rally moderate, while the pound strengthened against the dollar.

World Economy

• US:
  • PPI (Nov 2025): Producer prices rose +0.3% MoM (2.7 YoY), signalling mild inflation pressures.
  • Retail Sales (Sep 2025): Sales edged up +0.2% MoM, the weakest gain in four months.
  • Consumer Confidence (Nov 2025): Dropped to 88.7, lowest since April, pointing to cautious households.
• Germany:  GDP (Q3 2025): 0.0% QoQ, (0.3% YoY), economic stagnation persist in the biggest economy in Europe.

Please use the link below to access resources prepared by Forvis Mazars on the 2025 Autumn Budget:

Autumn Budget 2025 summary - Forvis Mazars

Economic Resources

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