Shares in London are trading with a slight bullish bias this morning, the FTSE 250 up marginally at 0.2 per cent and the FTSE 100 higher at 0.3 per cent. Gilt yields are steady this morning despite US Treasuries rallying, pushing the 10-year Treasury yield down below 4 per cent, which is acting as an anchor for the moment.

However, UK borrowing figures are a horror story – the highest in the financial year to date since the pandemic. And for what? The economy is growing, supposedly, so where is all this excess required? It means that such headroom Chancellor Rachel Reeves had is gone, it means that fiscally we are in a dire mess, and it means that tax rises are not just assured, but I feel it is likely that the government feels the only course of action is to break a manifesto pledge to raise income tax (or NICs or VAT). Without pulling on one of these big three levers, the government risks asymmetric growth impacts from squeezing particular interest groups like businesses, or the rich, or the property market, say. It also risks having to come back for more again – somehow, Reeves pulled off the trick of doing one of the biggest tax grabs in history last year, while simultaneously being one of the biggest fiscal loosenings ever.

The S&P 500 rallied 1 per cent to close the gap from the steep nosedive on Friday 10 October. It finished Monday at 6,735, exactly matching the closing price from 9 October, the day before the drop. On that day, the market opened at 6,740 and hit a high of 6,762 that day before closing down 2.7 per cent at 6,552. The S&P 500 sits 0.3 per cent below its 8 October record high. Apple shares rallied 3.9 per cent to a record high, helping to lift the broad market and pushing the Nasdaq Composite up a solid 1.4 per cent, on reports showing iPhone 17 sales are booming.

Japanese equities rallied to a fresh record as Sanae Takacihi was confirmed as Japan’s first female prime minister. She’s credited as being a ‘fiscal dove’ and for stimulus measures to boost the economy. The Nikkei 225 nearly hit 50,000 for the first time before paring gains on the session to finish just 0.15 per cent higher.

Elsewhere, gold rallied to another record before paring gains as investors bought the Friday dip…bitcoin fell to $108,000 this morning after rallying on the broad risk-on wave on Monday. 

Earnings today come thick and fast – 3M, Coca-Cola, GE Aerospace, Verizon, Lockheed Martin, General Motors and Netflix. 

Unilever fell almost 1 per cent as it pushed back the timetable for its ice cream split due to the government shutdown. 

Morgan Stanley raised its price target on Opendoor Technologies but is still not exactly bullish, going to a Street high $6 from $2 with the stock last at $7.37. This is definitely one where retail is at odds with Wall Street.

By Neil Wilson, investor strategist at Saxo UK