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investingLive European markets wrap: Another UK budget fiasco | investingLive

Headlines:

Markets:

  • NZD leads, JPY lags on the day
  • European equities higher; S&P 500 futures up 0.2%
  • US 10-year yields up 0.6 bps to 4.007%
  • Gold up 0.7% to $4,158.37
  • WTI crude down 0.3% to $57.79
  • Bitcoin down 0.4% to $86,650

There was a lot of anticipation ahead of the UK budget but the release ended up being rather anti-climactic amid a cock up by the OBR.

The UK body made an unprecedented mess up in publishing their fiscal outlook before Rachel Reeves’ statement, with it also containing key details of the budget itself. They proceeded to blame it all on a “technical error” of course but what’s done is done.

The forecast showed that Reeves’ budget will more than double the fiscal headroom from March, roughly amounting to £22 billion. Much of that will come from tax hikes, which were to be fair expected. That said, there will be much more spending as well.

While the fiasco might have stolen much of the headlines, the market reaction is rather choppy overall. GBP/USD rose from 1.3155 to 1.3200 initially before falling back to 1.3125 as traders digested the numbers and the headlines. Will this be Reeves’ final budget? The political backlash is now something to watch out for.

10-year gilt yields also moved lower initially from 4.49% to 4.43%. But all of that reversed in the past hour with GBP/USD now coming back up to 1.3180 and 10-year yields in the UK are now at 4.49%, after having hit a high of 4.54%. Expect much more volatility in the day(s) ahead as market players continue to digest the situation.

In other markets, there wasn’t much to talk about. The dollar is trading more mixed as it holds lower against the antipodeans but lightly changed against the rest of the major currencies bloc. USD/JPY remains underpinned though, up 0.3% to 156.50 as the yen continues to struggle amid the fallout from Takaichi’s fiscal plans.

AUD/USD is up 0.4% to 0.6495, keeping near large expiries at the 0.6500 level, after a push higher earlier from hotter-than-expected Australia monthly CPI data. Meanwhile, NZD/USD is up 0.9% to 0.5673 after the RBNZ looked to have delivered their final rate cut in this cycle. The pair moved close to 0.5700 earlier but is facing rejection from the mid-November highs just below the figure level.

In the equities space, stocks continue to stay optimistic on the week with European indices holding modest gains while US futures continue to nudge a little higher as well. As for commodities, gold is also keeping higher on the day but still stuck in the recent wedge/flag pattern with the high earlier touching $4,173 but is now at $4,158 – still up 0.7% on the day though.