UK Markets Trading in a Range ahead of the Budget:

Image Souce: Krish Capital Pty Ltd

Index Update: The FTSE 100 index, a key benchmark index for the London stock exchange, went down around 0.40% on 30 October 2024. HealthCare, Industrials & Technology sector demonstrated a substantial decline. Moreover, sectors such as Real Estate, & Utilities sector faced a significant growth. 

Macro Update:  UK finance minister Rachel Reeves is set to unveil substantial tax increases and additional borrowing on Wednesday to address underfunded public services and stimulate the economy, marking one of the largest tax hikes in three decades. The Labour government aims to meet its campaign promises without causing market disruptions, a cautious move following the 2022 market turmoil caused by former PM Liz Truss’s unfunded budget plans. Meanwhile, Standard Chartered raised its performance targets after surpassing quarterly profit expectations, focusing on expanding its wealth business while cutting retail banking. Anticipation around Reeves’ budget led to a spike in sterling option volatility, with traders hedging against potential currency fluctuations. In other news, British retailer Next raised its profit forecast after a strong Q3 sales boost due to an early start to colder weather, positioning it for a record £1 billion profit. 

Top Market Movers: Among top gainers on FTSE 100 index, Standard Chartered PLC (LSE: STAN) witnessed a rise of 3.13% followed by Entain PLC (LSE: ENT) which gained around 1.63%. 

Commodity Update: On Wednesday, the dollar remained close to a three-month high as significant macroeconomic data emerged, influencing U.S. monetary policy. Gold prices surged to a record $2,790.65 per ounce, reflecting increased safe-haven demand amid rising political uncertainty in the U.S. and Japan, particularly with the presidential election approaching on November 5. Japan's Liberal Democratic Party's recent loss of parliamentary majority added to the turmoil. In commodity markets, silver fell to $34.37 and copper dropped to $9,542.00 per ton. Brent crude futures rose 0.3% to $71.33 a barrel, supported by unexpected declines in U.S. crude and gasoline inventories. 

Our Stance: European shares dipped on Wednesday as investors awaited critical economic data from the Eurozone, including GDP and consumer confidence reports, alongside the anticipated UK budget announcement. The STOXX 600 and FTSE 100 both saw declines, impacted by cautious market sentiment surrounding the upcoming U.S. election. Gold prices reached record highs amid a market shift towards safe-haven assets. In Asia, shares were also under pressure, particularly in China, as the election's potential effects on global markets loomed, while Beijing continued efforts to stimulate economic growth. The current environment reflects investor caution as key economic events unfold. European markets and currencies may experience fluctuations based on the data releases and political developments expected this week, particularly with heightened volatility surrounding the U.S. election and the UK’s budget announcement.  

FTSE 100 

The FTSE index closed at 8,219.65, marking a modest decline of 0.80%. A bearish candlestick pattern has emerged, accompanied by increased trading volume, indicating rising investor anxiety. The day started positively at 8,178.14, but the index remains below the 21-period Simple Moving Average (SMA), which now serves as resistance. 
On the weekly chart, the 50-period SMA suggests a generally favourable long-term outlook. The Relative Strength Index (RSI) is at 40.64, reflecting some bullish momentum. The critical resistance level at 8,400 is pivotal; a breach could enhance market sentiment. However, if the index breaks below the strong support at 8,100, it could signal a continued downturn. With the index trading in a tight range, any breakout—upward or downward—could significantly impact the prevailing trend.