- Wall Street rallies, Asia pauses for breath
- Oil struggles as production increases hit home
- Unilever ice cream split delayed by US government shutdown
- UK Government borrowing rise highlights funding challenges
- Commercial building slumps
Steve Clayton, head of equity funds, Hargreaves Lansdown:
“Wall Street rallied strongly last night, with the S&P 500 index gaining 1.1% and the tech-heavy NASDAQ index as much as 1.4%. Investor optimism was boosted by hopes of trade tensions easing and renewed enthusiasm over the potential of AI to drive corporate earnings higher. The sentiment spilled over into trading in Asia overnight, but by the end of trading the rally had begun to flag, with many markets giving up much of their gains. There are of course plenty of profits that can be taken. Despite everything that has passed across our TV screens, the US stock market is up over 14% so far this year, with NASDAQ closer to 20% ahead. European stocks are up by almost 13% and Asian markets have gained an extraordinary 25% in 2025.
So far this morning in the UK, trading is off to a gently positive start with the FTSE100 index rising 0.3% to 9,433 led by Segro, which gave a positive trading update this morning. Coca Cola HBC is the biggest loser, down some 4.5% to 3382p after announcing a $2.6bn deal to buy Coca Cola Beverages Africa Pty. Overall though, corporate news flow is pretty thin on the ground this morning.
Oil markets have been weakening in recent weeks to leave Brent crude futures hovering around $61.1, little changed on the day but far below the $70 level seen in late September. Traders are increasingly concerned about the sheer quantity of supplies of crude oil out there. Successive production increases from the OPEC nations have raised output, but much of that extra output has simply been loaded onto tankers and left floating at sea, unsold. Traders know that sooner or later these floating supplies will hit the market, which could send crude prices down further.
Unilever is in the process of demerging its ice cream division, now known as The Magnum Ice Cream Company, onto the US stock market. But the deal has hit a snag, in the form of the US Government shutdown. With federal employees laid off until Congress agrees a new funding deal, there’s simply no-one available to approve the paperwork, putting the demerger on hold. With neither the White House nor the opposing Democrats seemingly prepared to give ground on spending, Magnum’s stock-market debut is stalled for now.
Borrowing figures out this morning highlight the challenge facing Chancellor Rachel Reeves ahead of November’s budget. Last month, the UK government borrowed £20.2bn, taking borrowing for the first half of the fiscal year to £99.8bn, up £7bn on the same point last year. Much of the increase is down to the rising cost of servicing the government’s existing borrowings, highlighting the fragility of the government’s position. It basically needs to borrow more money to pay the interest on the money it has already borrowed. Without an uptick in tax revenues or a decrease in interest rates, this situation will not go away.
Property market data specialists CoStar report that UK commercial building activity is now at the weakest level in over a decade. Worst still the pace of new building starts is at the lowest level in a century. Demand for new office space has been weak since the pandemic, but the building sector has also struggled with rising costs, and the two factors have combined to hit returns for developers, explaining their reluctance to commit to new projects. Demand is strongest in London, also around Oxford and Cambridge where the Life Sciences sector is expanding. Elsewhere, though, the story is one of weakening commercial property markets, from offices to industrial and warehousing. Land values are being hit hard as a result.”
