One week on from the Budget – UK shares reaction

Commenting on a week on from the Autumn Budget and how UK shares have responded with a real estate sell-off, energy boost, and financial sector relief, Mike Owens, Senior Sales Trader at Saxo in the UK, said:

“Following last week’s budget, UK shares have had a mixed response with client flows remaining steady due to a broader focus on global shares and a high degree of influence from international market conditions. Despite no clear shift in activity patterns, domestic sectors have seen distinct responses, reflecting specific budget impacts and evolving economic sentiments. Share prices across sectors have come under pressure as gilt yields surged, with the 10-year gilt yield hovering around 4.5% — interestingly, the same peak that was observed after the 2022 Liz Truss mini-budget, albeit the wider macro picture is different, as is the pace and size of the move. The current environment shows a greater market acceptance of these levels compared to the previous period, despite the ongoing challenges for interest-sensitive sectors.

“Real estate experienced notable sell-offs, partly from investor expectations that may have prematurely factored in more housing incentives. Higher yields have also limited banks’ flexibility to reduce mortgage rates, adding further strain to the housing market. Energy stocks benefited somewhat from a modest rise in crude oil prices and solid quarterly earnings from Shell, which helped offset broader market declines. Additionally, bookmakers saw a relief rally, boosted by the absence of a tax hike on profits, while financials found some reassurance in avoiding targeted budget constraints. With interest rates projected to remain elevated, financials could see support for net interest income in the near term.

“In currency markets, sterling has shown minimal movement since the budget, with the market still pricing a 95% chance of a 25-basis point cut from the Bank of England on Thursday, in line with prior market pricing.”

Attached are selected UK share position changes traded on Saxo’s platform.

NB: Data excludes instruments with a net change of two positions or fewer.