Morning Macro 4th November
UK long-end yields extended their rally, with the 30-year gilt dropping 6bps to 5.144% – the lowest since April – as Chancellor Rachel Reeves reaffirmed her “iron-clad” commitment to fiscal discipline ahead of what’s expected to be a tough, tax-heavy budget later this month. Her three priorities are lofty – cutting NHS waiting lists, reducing the national debt and improving the cost of living.
It’s not going to be cheap – UK Chancellor Rachel Reeves should boost her fiscal buffer to £20 billion by implementing around £26 billion in tax increases in the November 26 budget, the Resolution Foundation said Tuesday. (Figure 1)
The pound weakened further, down 0.3% to hover near $1.31. Meanwhile, the FTSE 100 slipped 0.7%, though its heavy weighting of global exporters provided some cushion, leaving it faring better than most European peers as sterling’s slide helped offset domestic market weakness.
Amazon continues its surge, up another 4% (Figure 2) yesterday on $38 billion deal with OpenAI for access to AWS cloud infrastructure and Nvidia graphics processors (Nvidia climbed 3%), as the circle of AI investment continues. S&P 500 is beginning to move sideways, just below 6,900 points and its all-time high of last week and Emini futures are down 1% this morning.
Palantir earnings saw it gain 7% beating expectations, but profit taking immediately meant it dropped and is now 5% lower than before the report. (Figure 3)
Bitcoin has fallen to $104,430, its lowest since 17 October – if it falls another $1k it will be at a new low since 23 June!
RBA kept rates in line at 3.6%. The board anticipates one additional rate cut in 2026, projecting underlying inflation to climb above 3% in the near term before easing back to around 2.6% by 2027.
Data today: France budget balance, Lagarde speech, Bowman speech, Redbook.
