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Highlights:
- UK Budget Focus: Prime Minister Keir Starmer and Chancellor Rachel Reeves emphasize improving living standards, the NHS, and infrastructure in the upcoming budget.
- Gambling Sector Hit: Major UK gambling firms suffer sharp losses amid reports of a potential tax hike in the sector.
- Inflation in Focus: Investors await key inflation data from the UK and eurozone, with global markets watching central bank decisions closely.
The London stock market was in the red on Monday as investors braced for key inflation data from the UK and the anticipated budget announcement at the end of the month. The FTSE 100 index edged down by 0.1%, with the FTSE 250 also losing ground, reflecting concerns over economic headwinds and uncertainty surrounding potential policy changes.
Markets React to Upcoming Inflation and UK Budget
The FTSE 100 was down 7.7 points at 8,245.95 by midday, as traders awaited Wednesday’s UK consumer price index (CPI) report. Prime Minister Keir Starmer and Chancellor Rachel Reeves have signaled a focus on boosting living standards, improving the NHS, and investing in housing and transport in the upcoming budget. Reeves’ first budget on October 30 is expected to include tough decisions to address the economic challenges facing the country, including potential tax increases.
The focus on inflation remains pivotal, with analysts expecting UK inflation to have softened. However, core inflation is projected to hover around 3.5%, well above the Bank of England’s target of 2%. The inflation report could set the tone for monetary policy, with BoE Governor Andrew Bailey hinting at a more aggressive stance on rate policy, which has already pressured the pound.
European and Global Markets Mixed
In Europe, the CAC 40 in Paris and the DAX 40 in Frankfurt displayed mixed performances, while China reported weaker-than-expected inflation data, further emphasizing global economic uncertainty. China’s consumer inflation cooled to 0.4% in September, raising concerns about fragile demand in the world’s second-largest economy. To counteract these challenges, China announced plans for special bonds to support banks, boost the property market, and tackle local government debt, part of a broader effort to stabilize the economy.
Meanwhile, the European Central Bank is expected to address inflation concerns and sluggish growth by potentially lowering interest rates again this week. Inflation in the eurozone fell to 1.8% in September, marking the first time it has dropped below the ECB’s 2% target since 2021.
Gambling Sector Tumbles on Tax Raid Fears
The UK gambling sector took a significant hit after reports suggested the government may double taxes on online casinos and bookmakers as part of the upcoming budget. Shares in major gambling firms plummeted, with Entain dropping 7.3% and Flutter Entertainment losing 5.6%. William Hill-owner Evoke tumbled 12%. The Treasury is reportedly considering proposals that could raise up to £3 billion through higher taxes, although the government has not confirmed any final decisions.
While some analysts, including Citi, believe that such a drastic tax hike is unlikely, there is a growing expectation of incremental increases in gambling duties. Jefferies added that the proposed tax changes could potentially wipe out the profitability of bookmakers in the UK.
Key Market Movers and Corporate Developments
- Mulberry Group gained 18% following a raised takeover offer from Frasers Group. However, majority shareholder Challice reiterated its lack of interest in selling its stake, creating uncertainty around the deal.
- AstraZeneca rose 0.8% after its cancer drug, Enhertu, received approval in China for treating a type of lung cancer, marking its fourth approval in the country across different tumor types.
- EasyJet shares climbed 1.9% after announcing Jan De Raeymaeker as its new chief financial officer, effective in January 2025.
Looking Ahead
As inflationary concerns continue to dominate market sentiment, investors will closely monitor upcoming economic data, including UK CPI figures and eurozone updates. The Bank of England’s monetary policy stance and the UK government’s budgetary decisions will play crucial roles in shaping the direction of markets in the coming weeks.
