Market Report.
🦃 Today should be a day of calm with the world’s largest stock exchange on holiday for Thanksgiving. That means low liquidity, quiet trade.
🏛️ Yesterday’s key event was the long-awaited announcement of UK tax reform.
⚠️ The budget announcement was marked by a significant procedural error, as the Office for Budget Responsibility (OBR) released its documents online about 30 minutes before Chancellor Rachel Reeves began her speech in Parliament. Reeves criticized this as a “serious error.” The OBR subsequently apologized for the “technical error” and launched an investigation, pledging to report its findings to the Treasury and relevant parliamentary committees. Although the budget’s contents had been widely anticipated through leaks, its overall presentation was seen as undramatic, with the most unpopular measures scheduled for the later years of the government’s term.
💷 The budget’s core feature is a substantial tax increase of £26 billion, which is projected to push the UK’s overall tax burden to a historic high of 38% of GDP by 2030-31. The largest tax rises are timed to take effect just before the next general election. While the OBR did downgrade its growth forecasts, the reductions were less severe than expected. This allowed Chancellor Reeves to establish a £22 billion fiscal buffer, a move that helped calm financial markets. However, the combination of higher taxes and weaker growth has led to doubts about the government’s ability to prioritize economic growth, with some analysts suggesting it could benefit a hard-right Nigel Farage-led government, who has been the favorite to win the UK election for a long time.
🎰 A major component of the tax rises involves significant reforms to the gambling sector. The remote gaming duty will be increased from 21% to 40%, and a new 25% general duty on remote betting (excluding horseracing) will be introduced. These changes are expected to raise £1.1 billion by the 2029-30 fiscal year. In contrast, the 10% tax on bingo will be eliminated. The announcements have negatively impacted the share prices of major gambling firms, and the industry has warned that the tax hikes will lead to job losses and higher costs for customers, arguing it is a targeted move to raise public revenue.
🧾 Other key measures include extending the freeze on income tax thresholds—a move known as “fiscal drag” that pulls more people into higher tax brackets—and implementing higher taxes on asset income, including dividends and property. The budget also introduces a new “mansion tax” style council tax surcharge for high-value properties and changes ISA allowances. To offset some of the financial pressure on households, the government announced future cost-of-living support, including an average £150 reduction in annual energy bills from 2026 and an extension of the 5p fuel duty cut until August 2026.
📉 According to Bloomberg, the London Stock Exchange is facing a multiyear drought in initial public offerings (IPOs): London has fallen out of the top 20 venues for IPOs by fundraising volume, now sitting behind rivals like Mexico and Oman. Annual IPO fundraising in London has plummeted from over $50 billion two decades ago to struggling to reach $2 billion in recent years.
🏦 Companies are opting to go public elsewhere, with major firms like Arm Holdings and Shein choosing to list in the US or Hong Kong instead of London. London has also seen over $100 billion worth of London-listed firms announce plans to switch their main share listings to New York in recent years.
🇺🇸 The allure of the deeper, more liquid US market, as well as the opportunity to secure higher valuations, is drawing companies away from London. The UK government is trying to revive the market, including pausing stamp duty on new listings and reducing cash ISA limits to encourage more investment in stocks.
🤖 Chinese AI startups appear to be more reasonably valued, with valuations around a quarter of their U.S. peers, while benefiting from lower R&D costs. Chinese AI and robotics startups like AI2 Robotics are facing fundraising challenges, with U.S. rivals like Figure able to raise much larger sums, such as $1 billion in a single round.
💡 To overcome this, Chinese startups are developing more efficient AI models that use a fraction of the parameters required by larger models like Alphabet’s RT-2. This “do more with less” strategy has allowed Chinese AI companies like DeepSeek to offer AI services at much lower costs than U.S. players like OpenAI.
📉 While Chinese companies have resumed IPOs in Hong Kong, stock investors remain more cautious on China than the U.S., with the Hang Seng trading at a much lower P/E ratio than the Nasdaq.
📚 The Massachusetts Institute of Technology (MIT) has released a study that found artificial intelligence (AI) can already replace 11.7% of the U.S. labor market, or up to $1.2 trillion in wages across finance, healthcare, and professional services. The study was conducted using a labor simulation tool called the Iceberg Index, which was created by MIT and Oak Ridge National Laboratory.
🧊 The Iceberg Index simulates how 151 million U.S. workers interact and how they are affected by AI and corresponding policy. The index found that the visible impact of AI in tech, computing, and IT jobs represents just 2.2% of total wage exposure, while the remaining 9.5% is in areas like HR, logistics, finance, and office administration.
🌎 The index challenges the assumption that AI risk will be confined to tech roles in coastal hubs, showing that exposed occupations are spread across all 50 states, including inland and rural regions.
🔥 A devastating fire occurred in a residential housing complex in Hong Kong yesterday, which has resulted in at least 44 deaths and hundreds of people still missing. The fire broke out around 3 pm on Wednesday in a section of bamboo scaffolding encasing an eight-tower housing block in northern Hong Kong. The blaze turned the complex into an inferno, sending thick black smoke billowing into the sky. Rescue efforts continued overnight.
🚨 Hong Kong Chief Executive John Lee said 279 people were still feared missing, and a criminal investigation has been launched. The fire is Hong Kong’s worst residential fire in more than half a century, surpassing a 1962 blaze that killed 44 people. Two directors and a consultant from an engineering company have been arrested on suspicion of manslaughter. Chinese President Xi Jinping has urged all-out efforts to reduce casualties and asked other local governments to aid Hong Kong in the rescue mission.
🛢️ Oil prices fell on Thursday. Expectations of a potential Ukraine-Russia ceasefire, which could lead to the unwinding of Western sanctions against Russian oil supply. The thin trading volume due to the U.S. Thanksgiving holiday is also contributing to the market’s directionless nature. The OPEC+ group is likely to leave output levels unchanged at their meeting on Sunday, as some members have been raising production to gain market share.
📉 Limiting the price declines are rising expectations for a U.S. Federal Reserve interest rate cut in December, which typically stimulates economic growth and boosts oil demand. Oil market seems to be stuck between the potential for progress in Russia-Ukraine peace talks and what that would mean for oil supply, versus the broader risk-on trade expectations around a Fed rate cut.
Geopolitics.
🕊️ Bloomberg has revealed crucial information about the peace negotiations in the Ukrainian war: Leaked recordings reveal that Steve Witkoff, a Trump envoy, advised Russian officials on how to present a peace plan to President Trump.
🤝 Witkoff is scheduled to travel to Moscow with U.S. officials to discuss the plan, which Ukrainian President Zelenskyy says he is ready to advance. However, Kyiv and its European allies express concern that the plan appears to concede to key Russian demands, such as blocking Ukraine’s NATO membership and formalizing Russian control over parts of Ukraine.
🇷🇺 Russia denies making major concessions and condemns the leak as “hybrid warfare” intended to undermine peace efforts. The Kremlin also states it is premature to discuss a deal, as its forces continue to advance in Ukraine. Trump describes Witkoff’s actions as standard negotiation tactics.
🧩 Much harder has been the criticism on the EU amendments to the initial plan of Trump that has published by the financial blog ZeroHedge, under the title: “Escobar: The European Matryoshka Of Irrelevance”. The author suggests that the EU’s “counter-plan” is a diversionary tactic to distract from the corruption scandal in Kiev, which the author believes will eventually lead back to decision-making circles in Washington and Brussels. Also, He contends that the EU elites have invested heavily in the “inevitable collapse and looting of Russia,” which is why they have no Plan B, and that the economic collapse will be “epic” if the EU admits defeat.
Market View.
📈 Markets posted further gains yesterday. Mini S&P 500 futures broke above 6,800 points and are currently trading around 6,830. Nasdaq 100 futures also moved higher, surpassing 25,300 points. In both cases, the market has remained relatively static in recent hours due to the holiday period and lower liquidity.
💱 The DXY dollar index continued its decline after several weeks of strong gains, falling below 99.50 in recent hours before recovering slightly to 99.60. This zigzag allowed EUR/USD to briefly break above 1.16, before retreating to the current 1.1590.
💷 Sterling also strengthened against the dollar, with GBP/USD climbing above 1.3250 before easing back to 1.3230.
🇪🇺 In Europe, futures also advanced, though without Wall Street’s momentum they may see limited movement today. DAX 40 futures are trading at 23,755 points, while EuroStoxx 50 futures are around 5,650 points.
🛢️ The crude oil market is also showing signs of sideways movement. On Tuesday, Brent fell below $61, but has since rebounded to around $62.50.
🥇 Gold futures, however, continue to make progress; yesterday they approached $4,200 per ounce, though they did not manage to break through, currently trading around $4,195.
🪙 Bitcoin appears to be extending its recovery, climbing back above $91,000, now trading at $91,250.
