Tech stocks suffer fresh sell-off over AI bubble fears

Tech stocks are under pressure on Wall Street - Michael Nagle/Bloomberg

Over $420bn (£320bn) was wiped off the value of the biggest seven US tech giants on Thursday afternoon as a fresh sell-off took hold.

Concerns that tech firms were overpriced have inflamed sentiment on Wall Street, after a brief respite on Wednesday.

On Tuesday, warnings of a market correction from Wall Street executives prompted a sharp sell-off in markets driven by AI-linked stocks.

Among the so-called “magnificent seven” stocks, Nvidia fell 3.3pc, Microsoft lost 1.8pc, Amazon dropped 3.2pc, Facebook owner Meta fell 2.4pc, Google owner Alphabet dipped 0.3pc and Tesla plunged 5.4pc. Apple, however, rose 0.2pc.

The stock price falls pushed Wall Street’s Nasdaq index down 1.9pc. The S&P 500 lost 1.2pc and the Dow Jones fell 1pc.

An index of the US information technology sector fell 1.9pc, with chip-makers, hoping to cash in on the AI boom, among the biggest fallers. AMD plummeted 7.1pc, Intel dropped 3.8pc and Arm Holdings lost 2.1pc.

Dennis Dick, chief strategist at Stock Trader Network, said: “It’s been an excellent couple of months for the market and a little bit of a corrective phase here is warranted.”

Jake Dollarhide, of Longbow Asset Management, said: “The market wants guidance and right now, with tariffs, the [US government] shutdown and possibly peak AI, the future could be bleak.”

The mood on the market was also influenced by news that US employers cut more than 150,000 jobs in October, the biggest reduction for the month in more than 20 years.

Nick Saunders, of Webull UK, said: “Any bad news is being punished quite badly and tech stocks particularly so. The bull run has been propelled upwards by tech stocks and the idea is that they’ll be the first to fall, so no one wants to be the last one holding them.”

Pessimism among investors also pushed UK and European stocks lower. The FTSE 100 closed down 0.4pc, while France’s Cac 40 lost 1.4pc and Germany’s Dax fell 1.3pc.

06:21pm

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06:18pm

US redundancies surge to highest since 2003

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US layoffs have surged to the highest level recorded in any October since 2003 in a major warning sign for the American economy, new data shows.

Last month 153,000 Americans lost their jobs, a number that was up 175pc compared to the same month a year ago, according to a report by Challenger, Gray and Christmas, a firm that helps laid off workers find jobs.

More than 1m people have been laid off so far this year, up 65pc on the same period in 2024 and 44pc more than the total jobs cuts announced across the entirety of last year.

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Year-to-date job cuts are at their highest level since 2020 when the Covid pandemic hammered the jobs market.

Andy Challenger, chief revenue officer at Challenger, Gray & Christmas, warned that the layoffs are being driven by the rise of artificial intelligence, slower spending and hiring freezes.

Mr Challenger said: “This is the highest total for October in over 20 years, and the highest total for a single month in the fourth quarter since 2008.

“Like in 2003, a disruptive technology is changing the landscape.”

Those who have been laid off are now finding it harder to secure new jobs quickly, he added.

05:47pm

Bank of England pushes pound higher

The pound has continued to rise against the dollar today and is currently up 0.6pc at $1.3124.

Danni Hewson, head of financial analysis at AJ Bell, said that the possibility of a rate cut today had been pushing the pound lower.

She said: “For the past twelve months the Bank of England has proved to be as dependable as clockwork when it’s come to delivering interest rate cuts, so it was unusual that today was filled with a degree of jeopardy.

“But in the end the upcoming Budget was as much a reason to keep calm and carry on as it was to act before the economic climate was right, with the MPC [monetary policy committee] split 5-4 in favour of a hold versus a cut.

“London markets enjoyed a brief lunchtime rally, but it couldn’t be sustained as attention once again returned to the fragile nature of economies both foreign and domestic.

“Investors rewarded positive trading updates like Sainsbury’s and were quick to take exception with those that failed to live up to expectations, with Hikma Pharmaceuticals and Smith and Nephew both seeing shares slump significantly.

“One by-product of the anticlimactic MPC decision was the strengthening of sterling. Slow and steady cuts have been priced in, but even the potential of an unexpected cut had been pummelling the pound.

05:25pm

FTSE 100 slips amid hold on interest rates and fresh US falls

The FTSE 100 fell on Thursday as the Bank of England left interest rates unchanged in a tight vote and Wall Street suffered a tech-focused selloff.

The FTSE 100 Index closed down 0.4pc, at 9,735.78.

The FTSE 250 ended 0.9pc lower, at 21,905.03.

The Bank of England kept rates on hold in a knife-edge vote, with the decision of governor Andrew Bailey proving decisive.

Despite the perceived “dovish” hold, the pound traded higher against the dollar as the greenback gave up recent gains across the board.

Sterling was quoted at $1.3106 at the time of the London market close on Thursday, higher compared with $1.3037 on Wednesday.

Despite the stock market falls, the FTSE 100 outperformed European and US peers.

04:37pm

Bailey: we need to see further progress on inflation

The Governor of the Bank of England has said that he needs to see more progress on inflation for rates to be cut.

Andrew Bailey told Bloomberg: “In August, I would say I was concerned more by the upside risk [of higher inflation].

“But I think the news that we’ve had subsequent to that has left me in a more balanced position.

“As I’ve said a number of times, we do need to see more evidence because so far we’ve had one inflation number that’s come in under what we thought, which is obviously good. We need to see some more.”

04:16pm

Bailey says Budget ‘an important one’

Rachel Reeves’s Budget later this month is “an important one”, the Governor of the Bank of England has said.

Andrew Bailey told ITV News: “All Budgets are important but this is I think an important one and therefore people do say ‘I want to see what’s in it’. So I am, in that sense, uncertain till I see what’s in it. I can see that.

“I think there are self-evidently issues in the underlying economic fiscal situation which the Chancellor has actually said very clearly need to be tackled. And I think the Chancellor has said very clearly she’s going to do it. So I think we’re going to wait and see what she does.”

03:55pm

Wall Street drops as tech sell-off resumes

Wall Street’s main indexes fell on Thursday, as technology stocks came under fresh selling pressure. Meanwhile US tariff concerns and uncertainty around the health of the economy kept investors on edge.

Most tech stocks declined as worries over stretched valuations lingered, after a brief respite on Wednesday.

Warnings of a market pull-back from Wall Street executives on Tuesday had prompted a sharp sell-off in markets driven by AI-linked stocks.

Tesla is down 3.7pc, Oracle is down 4pc, Microsoft is down 2pc and Nvidia is down 2.3pc. Apple is up 1.1pc.

An index of the information technology sector fell 1.5pc.

Overall, the S&P 500 is down 0.9pc, the Dow Jones is down 0.7pc, and the tech-heavy Nasdaq is down 1.6pc.

Dennis Dick, chief strategist at Stock Trader Network, said: “We have uncertainty from the Fed decision next month, on where the tariffs are going, with the government shutdown ... the markets are a little bit cautious right now.

“It’s been an excellent couple of months for the market and a little bit of a corrective phase here is warranted.”Wall Street’s main indexes fell on Thursday - Michael Nagle/Bloomberg

03:49pm

Floating possible taxes is undermining the tax base, says think tank

Floating potential taxes before the Budget is causing some of the biggest taxpayers to flee, a think tank has warned.

Madsen Pirie, of the Adam Smith Institute, said: “Floating punitive ideas, even if never implemented, can cause people to plan to leave earlier.

“Countries that legislate clearly and then avoid constant debate tend to retain confidence better. The current pre-Budget ‘expectations management’ has floated outrageously punitive ideas to make the actual Budget seem less harsh when it is published. This has the perverse effect of driving people away earlier.

“The conclusion must be that improving predictability, competitiveness and quality of life are likely to be more successful at retaining wealthy individuals than imposing an exit tax. Clear and stable rules combined with an attractive environment tend to work better than punitive or unpredictable policies.”

03:40pm

Dollar falls and pound rises on interest rate expectations

The dollar has fallen today after data showed weakness in the US jobs market, increasing expectations of another rate cut this year.

It came as sterling rose after the Bank of England kept rates unchanged ahead of this month’s budget. The bank had been expected to leave rates unchanged, although markets had attached a one-in-three chance of a cut earlier on.

US-based employers cut more than 150,000 jobs in October, marking the biggest reduction for the month in more than 20 years, a report by Challenger, Gray & Christmas said on Thursday, as industries adopt AI-driven changes and intensify cost cuts.

Economic data from private sources has drawn increased investor interest amid the absence of official data during the US government’s longest-ever shutdown.

Thursday’s weakness for the dollar follows a strong rally that started last week after the Federal Reserve tempered expectations for additional cuts this year amid limited economic data, persistent inflation, and internal disagreement among policymakers.

Antonio Ruggiero, foreign exchange strategist at Convera, said: “The move lower in the dollar ... was largely anticipated.

“The lack of data from the government shutdown led investors to inflate optimism around the US.

“When figures like the Challenger layoff report emerge, they easily trigger fear among investors who remain unconvinced about the durability of improved [dollar] sentiment.”

Traders now see a 69pc probability of a December rate cut in the US, up from 62pc on Wednesday, according to CME FedWatch. However, this remains well below the roughly 98pc odds priced in late October.

03:17pm

Business survey suggests rates will remain higher for longer

Some new data released by the Bank of England today suggests rate cuts may be slower than previously thought.

The monthly decision maker panel, of chief financial officers, revealed that companies’ own price hikes fell slightly, by 0.1 percentage points to 3.8pc in the three months to October.

The finance chiefs expect inflation a year from now to be 3.4pc, well ahead of the Bank of England’s target.

Rob Wood, chief UK economist at Pantheon Macroeconomics, summed up the figures: “Stubborn wages and prices keep the [monetary policy committee] cautious about how many more cuts follow a likely December reduction.”

Companies also reported on what they had done in response to Rachel Reeves’s National Insurance rise. Some 64pc of firms reported lowering profit margins, 44pc reported lowering employment, 37pc reported raising prices and 17pc reported paying lower wages.

02:49pm

Pound strengthens slightly as interest rates held

The pound ticked higher as the Bank of England held interest rates at 4pc.

Sterling was up 0.3pc versus the dollar at just under $1.31 but was little changed against the euro, which is worth about 88p.

Although analysts expect more rate cuts, they were divided over whether they would come as soon as the next meeting of the Monetary Policy Committee (MPC) in December.

Stefan Koopman, an analyst at Rabobank, said Andrew Bailey had opened the door to a cut at the next meeting after he said he wanted to see “if the durability in disinflation is confirmed in upcoming economic developments this year”.

Mr Koopman said: “With the MPC now truly data-dependent, the two inflation prints before that meeting will be key. The Autumn Statement will also be key.

“We continue to expect two more quarter point cuts and are still eyeing February and April 2026.”

02:39pm

US stocks edge down after jobs blow

Wall Street’s main indexes opened lower over concerns around surging valuations and weak unofficial employment figures.

The Dow Jones Industrial Average fell 55.9 points, or 0.1pc, at the open to 47,255.12.

The S&P 500 fell 8.7 points, or 0.1pc, at the open to 6,787.59​, while the Nasdaq Composite dropped 38.5 points, or 0.2pc, to 23,461.29.

The longest U.S. government shutdown in history has led to investors and the Federal Reserve flying blind ahead of the next rate decision and reliant on private sector indicators.

Global outplacement company Challenger, Gray & Christmas said US employers laid off staff last month at the fastest pace for an October since 2003.

Investors remained nervous after the S&P 500 and the Nasdaq had logged their biggest intraday drops in close to a month on Tuesday after warnings about the valuations of AI-linked stocks.

02:34pm

Rates to fall to 3pc next year, economists suggest

Britain’s weakening jobs market will lead to further interest rate cuts next year, economists have said.

Capital Economics thinks interest rates will be cut all the way from 4pc to 3pc next year, rather than the 3.5pc priced in by markets.

Chief UK economist Paul Dales said there were “no hints that interest rates will be cut” in December, meaning the next reduction would come in February.

He said: “Admittedly, the MPC is increasingly thinking about at what point it will need to stop cutting interest rates or, in other words, when rates will be back at neutral.

“The MPC noted that because of this, the case for more cuts becomes ‘more finely balanced’ the lower rates are. Put another way, once rates are  reduced to something like 3.5pc, the Bank would need convincing evidence to cut rates further.

“We think the neutral rate is around 3pc. And our forecast that the weak labour market will drag down wage growth and inflation by more than the Bank is forecasting may be the evidence the Bank needs to cut rates to 3pc. That would take rates below the 3.5pc priced into the markets. “

02:09pm

Bailey hints mortgage holders will only get two more rate cuts

Mortgage holders may only enjoy two more interest rate cuts from the Bank of England, its Governor suggested.

Andrew Bailey appeared to endorse the bets made by derivatives traders on money markets during a press conference today.

“The market curve does give you a reasonable view of a sensible path,” he said.

The comment appeared to refer to overnight index swaps, used by traders to bet on the path for interest rates.

At the moment, it implies rates will be cut twice more by June next year, taking interest rates from 4pc to 3.5pc.

Mr Baily added: “By the way, that’s not always the case... So we can’t guarantee you that will always be our view on the terminal rate question.”

01:46pm

Bank of England ‘set up’ for December rate cut

The Bank of England is expected to cut interest rates in December following the close vote to keep borrowing costs unchanged today.

Money markets suggest there is 69pc chance that borrowing costs will be lowered from 4pc to 3.75pc at the next meeting.

It comes after Governor Andrew Bailey used his casting vote to keep interest rates steady in a five to four vote of the Monetary Policy Committee (MPC).

Kallum Pickering, chief economist at Peel Hunt, said: “In all likelihood, this sets the Bank of England up for a cut in December as long as inflation continues to decline and the Government does not announce any inflationary tax or spending measures at the 26 November budget.”

Andrew Wishart, senior UK economist at Berenberg, said the close vote was “signalling this is a pause in the cutting cycle rather than the end of it”.

“It is only a matter of time before the Bank of England reduces interest rates again,” he said.

However, he said he disagreed with the “characterisation of demand as weak”, saying he expects rates to stay on hold again in December before a cut in February.

01:34pm

Bank to ‘draw attention’ to policies impacting inflation

Andrew Bailey said rate setters would continue to “draw attention” to the impact of government policies after they acknowledged Rachel Reeves’s tax rises had pushed up inflation.

In the Monetary Policy Report outlining the decison to keep rates at 4pc, it said much of the overshoot of inflation from the Bank’s 2pc target was “judged to reflect elevated labour cost growth, due to past strength in wage growth as well as higher employer National Insurance contributions”.

The Chancellor conducted a £25bn National Insurance raid in the Budget last year.

Mr Bailey was asked by our economics editor Szu Ping Chan if government policies on the minimum wage, the National Insurance increase and packaging taxes had helped or hindered the fight against inflation.

He acknowledged that so-called “administered prices” relating to items like utility bills “do have an impact” on inflation.

However, he said the pass through of National Insurance has “not been that different to what we were expecting at the time”.

He said: “It’s for government to decide its own policies because government has all sorts of other public policy objectives.”

He pointed to the example of water bills, where he said “fixing the water system is a public policy objective, it’s not the Bank of England’s public policy objective but it would not be for the Bank of England to go around saying ‘no attention should be paid to fixing the water system’.”

He added: “We have to take account of these. We have to draw attention to the effects of these, which we do, and then factor them into our outlook.”

01:17pm

Interest rates still restricting economy, says Bailey

Andrew Bailey said he thinks interest rates are still “restrictive” on the economy as it takes time for higher interest rates to feed through to the mortgage market.

The Governor of the Bank said the mortgage market in this country has changed fundamentally from one based on variable rates to one based on fixed interest rates.

He said this meant the “transmission of monetary policy takes longer and comes through more slowly”.

He acknowledged there are “different views on the committee on how restrictive policy is at the moment”.

He said he thinks interest rates are “still restrictive” although the “degree of restriction is reducing” as interest rates come down.

01:03pm

We could have an AI bubble, warns Bailey

Andrew Bailey has reiterated his warning that stock markets could be in an AI-fuelled bubble.

The Governor said: “It is obviously something that we look at very carefully.”

Last month, he wrote to his counterparts across the G20 to sound the alarm about the mismatch between rising asset prices and weak global economic growth.

At his press conference today, he said it was “perfectly possible and perfectly consistent” that “AI could be the next big mover in terms of productivity”.

“My own view, personally, is I think more likely than not it probably is, but we’ve still got quite a way to go to see that demonstrated,” he said.

“At the same time, we could have a bubble because the markets are pricing the future stream of returns from this and that’s uncertain.

“Those two things are not inconsistent. Markets could overprice the returns but the returns could still be substantial. So we will see.

“But we are watching the implications for financial stability and then the pass through it could have onto the broader economy.”Andrew Bailey said markets could ‘overprice the returns’ from AI - Chris Ratcliffe/Bloomberg

12:51pm

We need more than one inflation figure to cut rates, suggests Bailey

Andrew Bailey said policymakers need to see more data on inflation before deciding inflation is under control.

He said there had been one inflation number which came in under the Bank’s August projection.

“It does suggest we’ve reached the peak,” he said, but he warned “we need to see more than one number to establish that is in the picture”.

“I will be looking very carefully at the data we get before the December meeting,” he said.

12:47pm

Reeves has left Britain in ‘doom-loop’, say Tories

Shadow chancellor Sir Mel Stride said: “Interest rates are staying higher for longer because Rachel Reeves does not have a plan or a backbone.

“With inflation running at almost double the target rate, families are facing rising prices in the shops.

“The UK has the highest inflation in the G7 thanks to Rachel Reeves’ Jobs Tax and reckless borrowing spree.

“And yet she is once again preparing to hike taxes, leaving us trapped in a doom-loop.”

12:45pm

Votes on interest rate cuts will become closer, says Bailey

Andrew Bailey said he anticipates more close votes between members of the Monetary Policy Committee (MPC) on whether to lower interest rates.

Policymakers voted by five votes to four to keep rates at 4pc, with the Governor making the casting vote.

He said thay “if disinflation continues, Bank Rate is likely to continue on a gradual downward path” but he warned that the “extent of further reductions will depend on the outlook for inflation”.

He said “making this assessment involves weighing the evidence on both sides” for members of the who he acknowledged were split on whether to place more weight to downside or upside risks to inflation.

He said: “With every cut in Bank rate, how much further to go becomes a closer call.”

12:41pm

Bailey blames weak growth for falling inflation

Andrew Bailey said “further disinflation is being underpinned by subdued economic growth”.

The Governor warned there was a risk that activity “cools too much or for too long”.

He said there was clear evidence from the Bank’s agents around the country that the jobs market in Britain “is slowing too”.

12:39pm

Bailey: Inflation risks more balanced

Andrew Bailey said “underlying price pressures continue to ease” as he began his press conference at the Bank of England.

The Governor said inflation was considered to be at its peak and said policymakers needed to see a downward path “becoming established”.

He said the “risk to inflation is more balanced” but warned households and businesses remain cautious.

He expects wage growth to slow down further next year and said he was encouraged that inflation had peaked below the Bank’s August projections.

12:34pm

Reeves pledges to bring down cost of living

Chancellor Rachel Reeves said the latest report from the Bank of England showed inflation was due to “fall faster than previously predicted”.

She said: “Under this Government, we have seen five interest rate cuts that have helped bring down costs for families and businesses and today’s forecast shows that inflation is due to fall faster than previously predicted.

“At the Budget later this month I will take the fair choices that are necessary to build the strong foundations for our economy so we can continue to cut waiting lists, cut the national debt and cut the cost of living.”

12:27pm

Bank of England blames Government for rising inflation

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The Bank of England said government policies were to blame for a large share of the current overshoot in inflation from the Bank’s 2pc target.

“Nearly half of the firms responding to the latest DMP survey indicated that, in response to changes in employer Nics, they had already lowered employment by more than they would otherwise have done,” the Bank said.

The survey was conducted before Ms Reeves warned this week that “we will all have to contribute” to get debt down and support the NHS, in a sign she is preparing to raise income tax.

This could raise concerns of a steep drop in activity if Ms Reeves delivers a big hike in income tax.

In brighter news, the Bank said it was confident that inflation had peaked at 3.8pc. It expects price rises to have cooled again in October to 3.6pc and fall further next year.

12:19pm

Bank signals readiness to cut rates

The Bank of England signalled it was on the verge of lowering borrowing costs further after removing the word “careful” from its language around rate cuts.

Policymakers amended their line from previous statements that it they thought “a gradual and careful approach” to cutting rates was appropriate.

Instead they said: “If progress on disinflation continues, Bank Rate is likely to continue on a gradual downward path.”

12:12pm

Policymakers upgrade forecast for economy

The Bank of England has upgraded its outlook for the UK economy this year but said the unemployment rate could rise by more than expected, according to new forecasts.

Gross domestic product (GDP) is predicted to reach 1.5pc over 2025, higher than the 1.2pc that the Bank last projected in August.

Growth will then slow to 1.2pc in 2026, unchanged from its previous forecast.

But a weakening jobs market means that the rate of unemployment could rise to 5.1pc by spring next year. This is higher than the 5pc peak the Bank predicted before.

Employment growth is expected to remain “subdued” amid declining job vacancies and on the back of firms slowing hiring in response to higher taxes.

12:05pm

Bank of England vote split 5-4

Policymakers voted to keep interest rates on hold by the tightest of margins as they insisted inflation has peaked.

Sarah Breeden, Swati Dhingra, Dave Ramsden and Alan Taylor all voted for a quarter point reduction to 3.75pc.

Andrew Bailey, Governor of the Bank of England, said: “We held interest rates at 4pc today. We still think rates are on a gradual path downwards, but we need to be sure that inflation is on track to return to our 2pc target before we cut them again.”

12:00pm

Interest rates held at 4pc

The Bank of England has kept interest rates on hold after policymakers signalled that the recent rise in inflation has peaked.

The Monetary Policy Committee (MPC) voted to maintain the Bank Rate at 4pc by a margin of five votes to four in a decision which economists had warned would be a “close call”.

It comes as official figures showed inflation came in lower than expected in September at 3.8pc. However, the figure remains nearly double the Bank of England’s 2pc target.

In the minutes accompanying the Bank’s decision, it said inflation “is judged to have peaked”.

Chancellor Rachel Reeves said she would make lowering inflation a centrepiece of her Budget later this month.

In a speech from Downing Street this week, Ms Reeves said: “The choices I make in this Budget, this month, will be focused on getting inflation falling and creating the conditions for interest rate cuts to support economic growth and improve the cost of living.”

Capital Economics predicts Ms Reeves will raise taxes opt for £38bn of tax rises at the Autumn Budget, on top of the £41.5bn she raised last year – totalling just shy of £80bn.

The Bank’s decision breaks a cycle of cutting rates by a quarter of a percentage point at every other meeting since August 2024.

12:00pm

Interest rates held at 4pc

The Bank of England has kept interest rates on hold after policymakers signalled that the recent rise in inflation has peaked.

The Monetary Policy Committee (MPC) voted to maintain the Bank Rate at 4pc by a margin of five votes to four in a decision which economists had warned would be a “close call”.

It comes as official figures showed inflation came in lower than expected in September at 3.8pc. However, the figure remains nearly double the Bank of England’s 2pc target.

In the minutes accompanying the Bank’s decision, it said inflation “is judged to have peaked”.

Chancellor Rachel Reeves said she would make lowering inflation a centrepiece of her Budget later this month.

In a speech from Downing Street this week, Ms Reeves said: “The choices I make in this Budget, this month, will be focused on getting inflation falling and creating the conditions for interest rate cuts to support economic growth and improve the cost of living.”

Capital Economics predicts Ms Reeves will raise taxes opt for £38bn of tax rises at the Autumn Budget, on top of the £41.5bn she raised last year – totalling just shy of £80bn.

The Bank’s decision breaks a cycle of cutting rates by a quarter of a percentage point at every other meeting since August 2024.

11:47am

Bank of England poised to announce rate decision

A quick glance at the markets before the Bank of England announces its next interest rate decision shows the pound has risen 0.3pc against the dollar today to nearly $1.31.

The FTSE 100 has dropped 0.3pc to 9,748.16 and the yield on 10-year UK gilts – a benchmark for government borrowing costs – was little changed at 4.46pc.

A reminder that the decision comes as inflation held at 3.8pc for the third month in a row in September, which was less than the 4pc that had been expected but still well above the Bank of England’s 2pc target.

11:37am

Sainsbury’s boss warns tax rises risk higher food prices

The boss of Sainsbury’s has said customers are delaying spending ahead of this month’s Budget and cautioned against hitting retailers with further tax hikes that could send food prices even higher.

Chief executive Simon Roberts said shoppers are being “cautious” amid uncertainty of what may come in the November 26 Budget, with Chancellor Rachel Reeves’s speech on Tuesday widely being seen to have set the stage for tax hikes.

He said: “There will be some delayed spending until all of the news of the next few weeks comes through.”

Mr Roberts also echoed calls from others in the sector for Ms Reeves not to punish the sector with any further tax or costs pressures after it was hit with a rise in national insurance contributions in April, which has cost the chain an extra £140 million.

New regulatory costs on packaging have also added “tens of millions” to its costs, according to Mr Roberts, with the combined impact seeing the industry put up prices in response.

He said: “The inflationary pressures on cost base have been significant this year... what we don’t want to see is further impacts that may cause further inflation.

“No-one wants to see inflation go any higher.”

His comments come after Marks & Spencer boss Stuart Machin said on Wednesday that Ms Reeves’s pre-Budget speech had fuelled customer worries over tax hikes and he warned shoppers are now “planning for the worst”.Sainsbury’s chief executive Simon Roberts said shoppers are being “cautious” ahead of the Budget - REUTERS/Henry Nicholls

11:19am

US suffers most October job losses in two decades

The old adage is that when America sneezes, the world catches a cold.

In which case, policymakers at the Bank of England may be concerned by data showing US companies cut 153,000 jobs last month, the most during any October since 2003.

The figure was nearly triple that of the same month last year and was driven by losses in technology and warehousing.

Andy Challenger of Challenger, Gray & Christmas, which carried out the research, said it showed AI was reshaping industry.

He said: “Some industries are correcting after the hiring boom of the pandemic, but this comes as AI adoption, softening consumer and corporate spending, and rising costs drive belt-tightening and hiring freezes,”

11:02am

Reeves’s Budget will be a shot in the arm for Britain’s unloved stock market

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The Chancellor was busy on Tuesday morning giving a preview of what now looks certain to be a tax-raising Budget.

While her address was televised live to the nation, she actually had three narrower audiences in mind.

First, she wanted to give her backbenchers an overdue Economics 101 lesson in tax and spend. If you refuse to countenance spending cuts then you will have to accept higher taxes. It’s one or the other.

Second, she had political points to make. Backward-looking, as she continued to highlight the previous government’s record – plus a forward-looking warning about Reform’s still gestating economic policies.

But the most important audiences were the bond market and the Bank of England.Rachel Reeves wants to persuade the market that she is serious about inflation - Ian Forsyth/Getty Images

10:42am

FTSE 100 falls in run-up to rate decision

The FTSE 100 fell ahead of the Bank of England’s interest rate decision.

Britain’s flagship stock index was down 0.3pc as the pound strengthened in the run-up to the announcement. A stronger pound tends to hit the FTSE 100, where many companies measure their earnings in dollars.

Money markets indicate there is a 75pc chance rates will be kept on hold at 4pc. The domestically focused FTSE 250 was flat.

Fiona Cincotta, an analyst at City Index, said: “Just a few weeks ago, expectations had been close to 0 for another rate cut this month. However, CPI in September was cooler than expected at 3.8pc, peaking at a lower level than the 4pc forecast.

“There is also uncertainty surrounding the upcoming November 26 Budget, where the Chancellor is expected to hike taxes, which would slow the UK economy, accelerating the deterioration in the labour market, further boosting the case for more rate cuts.

“However, the hawks on the Bank of England could argue it’s prudent to wait for the Budget, as tax hikes would add inflationary pressures, as they did last year.”

10:25am

Construction downturn shows ‘consequences of tax speculation’

The downturn in Britain’s construction sector raises concerns the economy could falter in the fourth quarter of the year, economists have said.

Activity in the UK’s construction industry fell at the fastest pace in five years during October, according to the closely watched PMI figures from S&P Global.

The economic indicator fell to 44.1 last month, down from 46.2 in September and below estimates of 46.9.

Elliott Jordan-Doak of Pantheon Macroeconomics said this showed “prolonged speculation about tax hikes has consequences” and warned there were “downside risks” to its forecasts for the economy to expand in the fourth quarter of the year.

“The construction PMI is one of the few areas where pre-Budget uncertainty is showing up,” said Mr Jordan-Doak.

“We take the mood music seriously here, as the plummeting PMI suggests that projects are being postponed ahead of the Budget.

“Accordingly, we see downside risks to our call for GDP growth in Q4.”

10:07am

Construction declines at fastest pace in five years

UK construction companies suffered their sharpest slump since the early months of the pandemic as “political and economic uncertainty” hit demand.

The closely watched S&P Global UK Construction PMI showed a contraction in the sector for the tenth consecutive month in October, marking the longest period of continuous decline since the global financial crisis more than 15 years ago.

Staffing levels also fell at the steepest pace since August 2020.

“UK construction companies reported another challenging month in October as the prolonged weakening of order books so far in 2025 resulted in the fastest decline in business activity for over five years,” said Tim Moore, economics director at S&P Global.

“Subdued demand in the wake of heightened political and economic uncertainty also led to the steepest drop in input buying since May 2020.”

Matthew Pointon of Capital Economics said the sector was “not helped by uncertainty over the Budget”.

He added: “High interest rates will have also weighed on construction activity, with the 10-year gilt yield reaching 4.7pc in early October.”

09:46am

Pound edges higher ahead of rate decision

The value of the pound is creeping higher in a sign that traders are betting the Bank of England will keep interest rates on hold later.

Sterling was up 0.3pc against the dollar to $1.309 and had gained 0.1pc versus the euro at €1.137.

09:26am

Norway keeps interest rates at 4pc

Norway’s central bank left interest rates on hold at 4pc as expected as policymakers hinted at a rate cut next year.

Norges Bank said “no new information has come in that indicates a material change to the outlook”, adding that “if the economy evolves broadly as currently envisaged, the policy rate will be reduced further in the course of the coming year”.

Governor Ida Wolden Bache said: “The job of tackling inflation has not been fully completed, and we are not in a hurry to reduce the policy rate.”

Capital Economics said it expects Norway’s central bank to cut rates in March but acknowledged “risks are skewed towards a later move”.

Deputy chief eurozone economist Jack Allen-Reynolds said: “But any moves will be gradual and we see little reason for policymakers to cut interest rates a lot further. So the next cut may well be the last of this cycle.”

09:13am

Rate cut ‘finely balanced’

Julien Lafargue, chief market strategist at Barclays Private Bank, said the Bank of England’s decision was “finely balanced”.

He said: “Recent economic indicators – including September’s lower-than-expected inflation, softer wage growth, and signs of slowing activity in Q3 – strengthen the case for the Bank of England to consider a rate cut this month.

“However, this would be a very finely balanced decision as the central bank may see the upcoming the Autumn Budget as a key missing piece of the puzzle.

“Should the MPC decide to stay put, a cut in December would still be on the cards in our opinion.”

08:37am

Rate cut could widen government debt ‘moron premium’

The cost of government borrowing could rise further if traders think a rate cut will lead to above target inflation, an economist has warned.

Simon French, chief economist at stockbroker Panmure Liberum, warned the “moron premium” paid by Britain to borrow money could rise if markets think the UK’s inflation problem will worsen.

He said investors have been wary since the mini-Budget, high inflation in 2023 and “labour market policy since the general election”, when the Chancellor announced inflationary public sector pay rises.

The yield on 10-year UK gilts – a benchmark for the return the government pays to buyers of its debt – was slightly lower in early trading on bond markets today at 4.45pc. However, it remains well above 10-year bond yields in France at 3.45pc, Germany at 2.66pc and the US at 4.14pc.

Mr French said the higher borrowing costs paid by Britain compared to the rest of the G7 was “more linked to asymmetric UK inflation” rather than the outlook for public sector debt.

He warned: “If a rate cut crystallises today and is seen as accommodating above target inflation then expect this spread to widen.”

08:04am

UK stocks flat ahead of rates decision

The FTSE 100 was little changed at the start of trading as investors waited to see what the Bank of England decides on interest rates.

The UK’s flagship stock index was flat at 9,778.04 while the mid-cap FTSE 250 stalled at 22,080.35.

08:01am

Sainsbury’s on track for £1bn profit

Businesses push for interest rate cuts to allow them to borrow at cheaper rates and potentially grow at a faster pace.

Not that Sainsbury’s looks like it needs that right now.

The supermarket has said it is on track for annual retail earnings of over £1bn after a better-than-expected half-year performance.

The UK’s second largest grocer, which also owns the Argos chain, reported underlying operating profit of £504m for the 28 weeks to September 13, up slightly on last year’s £503m and better than the group had forecast.

Pre-tax profits lifted 5pc to £271m.

Sainsbury’s had previously said that retail earnings would remain flat over the full-year, at around £1bn, due to intensifying competition from rivals on price and a surge in costs.

But in its interim results, the group said: “While we will continue to make balanced choices to invest and sustain the strength of our competitive position through the most important trading period of the year, we now expect retail underlying operating profit of more than £1bn.”Sainsbury’s had a better-than-expected six months - Jason Alden/Bloomberg

07:38am

Pound near seven-month lows ahead of interest rate decision

The pound edged up after hitting a seven-month low overnight ahead of the Bank of England’s interest rate decision.

Sterling was up 0.2pc to $1.307, having dropped as far as $1.301.

Investors see just a 25pc chance that policymakers will cut rates from the current level of 4pc, although the chances of a cut over the next two meetings is around 65pc.

Investors will wait to hear what Governor Andrew Bailey says about the outlook in a press conference scheduled after the decision.

Andrew Wishart, senior UK economist at Berenberg, said the Bank’s decision would be a “close call” but forecast a hold by a margin on six votes to three.

He said: “Rising household inflation expectations and the August cut in Bank Rate lowered the real interest rate to zero.

“The drop in financial market interest rate expectations in October may have already turned the real interest rate negative on a forward-looking basis.

“The risk is that a misjudged cut in the nominal rate in November amid elevated inflation causes the Bank of England to lose control of the real interest rate, which would prolong the UK’s inflation problem.”

07:20am

Good morning

Thanks for joining me. Policymakers at the Bank of England are thought to be “deeply divided” as they prepare to announce their next decision on interest rates.

Economists and markets are also split on whether the Monetary Policy Committee (MPC) will announce lower borrowing costs later today.

Traders are betting there is around a 75pc chance that policymakers will keep interest rates on hold at 4pc.

However, economists at Barclays and Goldman Sachs have predicted that the Bank Rate will be cut to 3.75pc in a close vote between the nine members of the MPC.

It comes as inflation was lower than expected in September at 3.8pc, easing concerns about runaway price rises. However, the figure remains nearly double the Bank of England’s 2pc target.

James Smith, an economist for ING, said the MPC was “deeply divided” but would likely remain cautious about the risk of inflation being persistent.

He said: “Inflation has almost certainly peaked. Food inflation – a critical concern at the Bank of England this summer – fell back in September and is now running half a percentage point below official forecasts.

“This all comes at a time when the Bank is visibly divided on how problematic inflation really is.” Here is what you need to know.

5 things to start your day

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What happened overnight

Shares bounced back in Asia after Wall Street got a boost from upbeat economic updates and quarterly earnings.

In Tokyo, the Nikkei 225 gained 1.5pc to 50,959.14 as shares in Nissan Motor gained 1.3pc after the company said it was selling its headquarters building in Yokohama to raise cash. Nissan was due to report its earnings later in the day.

The Kospi in South Korea advanced 1.2pc to 4,054.15 and Taiwan’s Taiex was up 0.7pc.

Hong Kong’s Hang Seng jumped 1.6pc to 26,361.40, while the Shanghai Composite index climbed 0.9pc to 4,004.25.

On Wall Street, the Dow Jones Industrial Average rose 0.6pc, to 47,377.06, the S&P 500 rose 0.8pc, to 6,823.92, and the Nasdaq rose 1.2pc, to 23,616.11.

The yield on benchmark 10-year US Treasury notes rose to 4.161pc, from 4.091pc late on Tuesday.

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