Risk appetite evaporated across global markets on Friday, leaving Europe deep in the red at the opening bell.
The selloff, which first swept through Asia and then Wall Street, intensified as traders tried to decipher what the UK government will -- and won't -- include in its late-November budget.
Rather than the widely anticipated move to raise basic and higher income tax rates, Chancellor Rachel Reeves is now expected to leave those rates untouched. Multiple reports suggest the Treasury is instead considering shifting the income thresholds at which taxpayers enter different brackets. That approach keeps headline rates the same while quietly pulling more earners into higher bands.
Bond traders reacted instantly. Gilt yields whipsawed as investors recalibrated their expectations for the UK's fiscal roadmap. The benchmark 10-year yield pushed toward 4.57%, while the 2-year reached 3.82%, underscoring concerns that the government may struggle to close its budget gap if it abandons the simplest revenue lever.
Market strategists warned that uncertainty, not the tax structure itself, is doing the most damage. The risk, they argue, is that avoiding explicit rate increases forces the Treasury to search for smaller revenue-raising measures across multiple sectors -- an approach that could weigh on growth while still failing to resolve the deficit.
The equity reaction was swift.
The FTSE 100 slumped around 1.65%, dragged down by a sharp retreat in financial names. Lloyds, NatWest and Barclays each lost about 4%, helping to set the tone for a broader European decline. In Germany, the DAX slipped 1.38%, France's CAC 40 moved 1.31% lower, and the STOXX 600 weakened 1.52% as selling pressure spread across the region.
Despite the sour mood in equities, the British pound managed a cautious rise, trading just under $1.32 against the dollar -- a sign that currency markets are weighing the possibility of stronger UK household spending if direct tax rates ultimately remain unchanged.
For now, investors are waiting not for the November budget itself, but for clarity. With global markets already on edge, even small shifts in fiscal plans are proving enough to rattle sentiment.