Aftermath of UK autumn budget: where to next for stocks, yields and sterling?
UK budget aftermath – where to next?
What immediate impact has Chancellor Rachel Reeves’ significant UK budget featuring a £40bn tax increase and £28bn annual borrowing, alongside a £70bn spending boost for 2026-27 had on the British pound sterling, UK Gilt yields, sectors and stocks?
US Gilt yields surge to one-year highs
The autumn budget has triggered a rise in government borrowing costs, with 10-year and 30-year Gilt yields reaching respective one-year highs at 4.44% and 4.68%.
10-year Gilt daily candlestick yield chart
It has to be said the UK 10-year yield had already been rising from its 3.73% mid-September low to around 4.25% ahead of the autumn budget but since yesterday rallied to levels last seen at the beginning of November 2023.
10-year Gilt weekly candlestick yield chart
The next medium-term technical upside target, if a weekly chart close above the 4.42% May peak were to be made, would be the September 2022-to-October 2023 peaks at 4.58%-to-4.75%.
The 30-year Gilt yield is in a similar technical situation whereby a weekly chart close above the 4.88% May high would open the way for the psychological 5% mark and perhaps also the October 2023 peak at 5.20% to be hit.
British pound sterling little changed
The pound sterling saw some intraday volatility around the autumn budget but remained within a near 100 pip range versus the US dollar whilst being capped by a key technical resistance zone close to the $1.3000 mark.
GBP/USD daily candlestick yield chart
While GBP/USD remains below the $1.3000-to-$1.3045 resistance area, the October downtrend remains intact with the April-to-October uptrend line at $1.2935 representing the first downside target. A fall through it would put the October low at $1.2908 on the cards. Below it lies the June high at $1.2861.
Only a rise an daily chart close above the 15 October high at $1.3103 could help the bulls to take over the reins.
Versus the euro, the pound sterling depreciated more significantly post-budget, though, with the EUR/GBP pair bouncing from its key technical £0.8318-to-£0.8296 support area towards the 55-day simple moving average (SMA) at £0.8393. If bettered, the early October high at £0.8434 would be next in line, followed by the September peak at £0.8463.
Potential slips may encounter minor support around the 24 October high at £0.8352 with the major £0.8318-to-£0.8296 support zone expected to underpin into year-end.
EUR/GBP daily candlestick yield chart
UK autumn budget impact on FTSE 100, FTSE 250 and FTSE AIM All Shares
Despite initial market concerns, the FTSE 250 showed some positive response and closed around half a percent higher on Wednesday but the real winner was the FTSE AIM All Share Index which rallied by 4% as changes to inheritance tax proved no worse than feared.
Even though the Budget provided some certainty for smaller companies and UK investors, the FTSE 100 didn’t take well to the budget and has declined by nearly 2.5% over the past three days.
FTSE 100 daily candlestick chart
The FTSE 100 may find short-term support along the 200-day SMA at 8,082 but failing that, might slip to the late July low 8,056 and perhaps revisit the psychological 8,000 mark.
Any short-term recover is likely to encounter resistance between the September-to-early October lows at 8,169-to-8,185.
The technical picture could potentially be more positive for the FTSE AIM All Share index if an extension of Wednesday’s 4% rally to above a key technical resistance area were to ensue. It consists of the late September-to-mid-October highs at 3,625-to-3,635 and would need to be exceeded for a medium-term technical bullish reversal to unfold.
FTSE AIM All Share index candlestick chart
While the September-to-mid-October highs at 3,625-to-3,635 cap on a weekly chart closing basis, the May-to-October downtrend will be deemed to remain intact.
Betting, housebuilders and pub chains share price reaction
Shares in betting firms saw a relief rally after Wednesday's autumn budget contained no rumoured tax changes, while a cut in beer duty provided cheer to pub operators and the government’s infrastructure investment plans provoked an initial rally in the UK housebuilder sector.
Except for the gambling companies, which maintained most of their gains during Thursday’s continued sell-off in UK shares amid higher Gilt yields, the pub and housebuilder shares mainly resumed their pre-budget downward paths, and this despite Wednesday’s sharp intraday moves higher.