FTSE 100 consolidates at record levels
The FTSE 100 opened flat following a record close in the previous session, as investors weighed positive corporate updates against mounting budget uncertainty. The index remains well-supported by international earnings exposure, which provides some insulation from purely domestic economic concerns.
UK government bonds firmed slightly, with gilt yields edging lower as traders positioned ahead of the Bank of England’s (BoE) interest rate decision. The modest rally suggests markets expect a cautiously dovish tone from policymakers, even if the base rate remains unchanged at current levels.
Sterling held steady in a tight range around $1.30 to $1.31 against the US dollar. The pound’s resilience reflects expectations that UK interest rates will remain relatively elevated compared to other major economies, supporting the currency despite domestic economic challenges and political uncertainty.
European markets edged lower as French industrial group Legrand’s disappointing results sparked valuation concerns in technology-adjacent sectors. Peers including Schneider Electric and Siemens Energy declined in sympathy, highlighting how quickly sentiment can shift when highly-rated companies miss expectations.
Budget anxiety ripples through corporate Britain
The Confederation of British Industry urged Chancellor Rachel Reeves to avoid “death by a thousand taxes”, arguing that fewer, larger fiscal measures would reduce business uncertainty. The lobby group’s intervention reflects widespread corporate anxiety about the scale and scope of potential tax rises in the forthcoming budget.
ITV issued a stark warning that fourth-quarter (Q4) advertising revenue would fall 9%, underscoring advertisers’ nervousness about the economic outlook. The decline reflects broader concerns about consumer spending power and corporate marketing budgets as businesses brace for potential tax increases and economic headwinds.
Sainsbury’s upgrades guidance on premium demand
Sainsbury’s raised its profit guidance, extending year-to-date gains to approximately 25% as the supermarket chain benefits from robust demand for its premium own-label range. The Taste the Difference line has resonated strongly with cost-conscious consumers seeking quality without paying branded prices.
The grocer’s performance highlights a fascinating shift in consumer behaviour. Shoppers are increasingly willing to spend on premium food items whilst simultaneously cutting back on big-ticket general merchandise purchases. This “treat but trade down” pattern suggests households are prioritising everyday luxuries over major outlays.
Fuel sales declined 11% during the period, potentially freeing up disposable income for other categories. This reduction in motoring costs may have contributed to increased spending in Sainsbury’s food aisles, particularly within the premium ranges that have driven the upgraded outlook.
The supermarket’s strong showing contrasts sharply with struggles elsewhere in the retail sector. Whilst Sainsbury’s benefits from grocery resilience, other consumer-facing businesses are grappling with mounting uncertainty ahead of the government’s budget announcements.
Healthcare and spirits sectors face headwinds
Smith & Nephew plunged up to 10% after reporting weaker-than-expected quarterly sales, dragging down peers including Zimmer Biomet. The medical devices sector has struggled with post-pandemic normalisation and softer elective procedure volumes, particularly in key markets like the United States.
The company’s difficulties highlight challenges facing healthcare equipment manufacturers as hospitals manage tight budgets and patients delay non-urgent treatments. Competitive pressures and pricing dynamics have also intensified, squeezing margins across the sector and weighing on sentiment.
Diageo trimmed its guidance citing a slump in Chinese baijiu consumption and softer US spirits demand. The drinks giant’s warning reflects changing consumer preferences in two crucial markets, with younger Chinese drinkers favouring different beverages and American consumers pulling back on premium spirits purchases.
Whilst Diageo’s shares fell on the news, the damage appeared partly priced in following earlier profit warnings. The company continues to navigate a challenging transition period as it adapts its portfolio and marketing strategy to shifting global drinking habits.
Telecoms and industrials deliver mixed signals
BT reiterated its full-year guidance despite reporting higher customer churn in its broadband division. Intensifying competition from rivals offering aggressive promotional deals has pressured the telecoms giant’s market share, though management expressed confidence in stabilising the customer base through its network investment programme.
The company’s ability to maintain guidance suggests operational improvements and cost savings are offsetting revenue pressures. BT’s fibre rollout programme continues, positioning it for potential market share gains as consumers upgrade to faster connections and seek more reliable service.
Auto Trader and IMI rallied after delivering solid trading updates, demonstrating that some industrial and specialist businesses continue to find growth despite the uncertain macro backdrop. Auto Trader benefits from the resilient used car market, whilst IMI’s diversified engineering portfolio provides exposure to multiple end markets.
Hikma and Howden Joinery numbered among the day’s laggards after resetting outlook expectations. These downgrades reflect sector-specific challenges rather than broader market weakness, with pharmaceutical pricing pressures hitting Hikma and construction market softness affecting Howden.