Poor trading day for FTSE as markets await Wednesday’s Budget

A lower oil price and heavy falls in lender HSBC kept the FTSE 100 in the red on Tuesday, as investors look ahead to the Budget and US rate call on Wednesday.

In London, the FTSE 100 index ended down 80.79 points, 0.8%, at 10,686.54.

The FTSE 250 ended 215.12 points higher, 0.9%, at 24,716.37, and the AIM all-share advanced 5.31 points, 0.7%, at 758.49.

The FTSE 100 underperformed European peers, while the mood was also positive in the US as technology stocks rallied.

The falls in London came as shares in two of its blue-chip heavyweights HSBC and Reckitt Benckiser declined sharply after third quarter updates.

Asia-focused lender HSBC ended down 5.4% as third quarter net interest income came in shy of market expectations.

Constant currency revenue rose 4.8% to 18.62 billion dollars in its third quarter from 17.76 billion dollars but was below 18.93 billion dollars consensus.

While banking net interest income grew to 11.66 billion dollars from 11.05 billion dollars, missing the 11.90 billion dollars consensus.

Bank of America said it was a “soft” set of numbers, while Citigroup analyst Andrew Coombs called the results “mixed”.

In addition, Jefferies analyst Joseph Dickerson noted the deposit commentary was “incrementally cautious” with the bank flagging “emerging customer and competitive pressure on deposits in Hong Kong and the UK.”

Meanwhile, Reckitt Benckiser fell 4.9% as it lowered its annual guidance as third-quarter sales missed expectations due to an unexpected slowdown in the US.

The Uxbridge, London-based consumer goods firm, which owns products such as Nurofen painkillers, Strepsils throat sweets and Dettol antiseptic, now expects full-year 2026 like-for-like revenue growth for its core business of 3.5% to 4.5%, lowered from 4.0% to 5.0% before.

Reckitt said the shortfall reflects manufacturing constraints affecting household cleaning and disinfecting product Lysol in North America, and slower growth in China’s vitamins, minerals and supplements market.

RBC Capital Markets analyst James Edwardes Jones said the latest results are “not going to change the perception that Reckitt is inherently unpredictable”.

In European equity markets on Tuesday, the CAC 40 in Paris ended up 0.6%, while the DAX 40 in Frankfurt climbed 0.8%.

The Dow Jones Industrial Average was up 0.1% at the time of the closing bell in London on Tuesday.

The S&P 500 was 0.7% higher and the Nasdaq Composite added 1.3%.

On Wednesday, the Federal Reserve is widely expected to leave interest rates on hold.

David Morrison, analyst at Trade Nation commented: “While there’s only a 10% chance that the Fed will announce a rate hike tomorrow, investors remain convinced that there will be an increase in interest rates before year-end.

“US inflation remains well above the Fed’s 2% target, and we’ll get a fresh measure of how far above target it is on Thursday with the release of core PCE.”

Bank of America is an outlier among forecasters predicting a quarter point rate hike, following a similar sized increase by the Fed in September.

BofA thinks the October decision will be a test of chairman Kevin Warsh’s resolve to bring “sea change” to the Fed’s forward guidance strategy.

“Warsh’s challenge at the presser will be to head off a ‘policy error’ trade.

“If the Fed hikes, investors might have concerns about overtightening. If the Fed holds, markets could question the Fed’s credibility,” the broker says.

Ahead of the rate call, data showed US consumer confidence improved in October, driven primarily by a lull in fuel price increases.

The Conference Board’s Consumer Confidence Index rose by 7.5 points to 91.7 in October, the organisation said in a statement.

The data defied analyst expectations of a drop in confidence.

Against the dollar, the euro fell to 1.1142 dollars from 1.1183.

Against the yen, the dollar was trading at 157.88 yen, up from 157.53.

The yield on the US 10-year Treasury was quoted at 5.00%, stretched from 4.98%.

The yield on the US 30-year Treasury was quoted at 5.31%, widened from 5.30%.

The pound was quoted at 1.3307 dollars, down from 1.3353 dollars.

Against the euro, sterling edged up to 1.1943 euro from 1.1940.

Brent was quoted at 114.13 dollars a barrel, down from 117.02 dollars at the same time on Monday.

The falls came after Saudi Arabia, Turkey and Pakistan held talks with Iranian officials in Tehran on Monday aimed at reducing regional tensions.

Saudi Arabia said the visit was intended to establish open negotiating channels to “prevent the return of military escalation”.

The oil price fall saw Shell drop 1.8% and BP fall 2.9%.

Back in London, all eyes now switch to the budget.

Sue Noffke, manager of the Schroder Income Growth Fund said: “For UK equities, this needs to be a Budget that does no harm.

“After two years in which businesses have absorbed significant increases in costs and taxation, another broad increase in the corporate burden would risk undermining the investment and growth the Government wants to encourage.”

Ms Noffke says she will looking closely at the detail of the Your First Home scheme, and more broadly, additional investment channelled through public financial institutions into areas such as infrastructure, defence, AI and energy which could create opportunities for UK-listed companies, particularly if it succeeds in crowding in private capital.

“Ultimately, UK companies need greater policy stability and confidence to invest.

“A relatively uneventful budget that delivers that would not be a bad outcome,” she added.

On the FTSE 250, Vistry soared 8.2% as it said it has hired the chief financial officer of Severn Trent to be its own new CFO.

Vistry said Helen Miles will join as chief financial officer and board member during 2027.

Ms Miles joined Severn Trent in 2014 as chief commercial officer and became chief financial officer in 2023.

Shoe Zone plunged 8.8% after the footwear retailer forecast a swing to an adjusted pre-tax loss of around £1.0 million for the 53 weeks ended October 3, compared with a profit of £2.4 million a year earlier.

The company said the expected loss was in line with management expectations.

Revenue fell 4.5% to £142.4 million from £149.1 million, reflecting weaker consumer confidence and a reduction in its store estate to 251 shops from 269.

Gold was quoted at 4,057.67 dollars an ounce, up from 4,017.92

The biggest risers on the FTSE 100 were Antofagasta, up 137.0p at 3,311.0p, Barratt Redrow, up 9.20p at 337.9p, Endeavour Mining, up 106.0p at 3,983.0p, Rio Tinto, up 157.0p at 6,400.0p and Anglo American, up 91.0p at 3,838.0p.

The biggest fallers on the FTSE 100 were HSBC Holdings, down 74.0p at 1,291.4p, Reckitt Benckiser, down 266.0p at 5,218.0p, Pearson, down 47.0p at 1,325.0p, BP, down 18.1p at 612.7p and Associated British Foods, down 39.0p at 1,927.0p.

Wednesday’s local corporate calendar has third quarter results from drugs maker GSK, Asia-focused bank Standard Chartered and a trading statement from Marmite owner Unilever.

Wednesday’s global economic calendar has an Australian inflation print overnight, the UK autumn Budget and interest rate decision in Canada and the US.