WeekWatch - 26/10/2026

What's rattling markets?

It was a particularly tough week across financial markets as several concerns came back into focus. Global stock markets fell as investors re-examined the case for high levels of AI expenditure and further energy-driven inflation. Oil prices are at their highest level since June 2022 in response to escalating attacks on shipping in the Middle East. Speculation is also growing that the US will resume attacks against Iran following the US midterm elections in just over a week. French government bonds continued to weaken, with yields rising as prices fell. Responses to the civic unrest may complicate moves to repair the weak public finances. US Treasuries benefited as investors sought safety, with the yield on the 10-year bond falling below 5%. The Japanese yen also strengthened. The gold price weakened. As gold does not generate any income, higher interest rates make it less attractive to investors relative to interest-bearing assets.  

In the UK meanwhile, all eyes will be on Chancellor John Healey as he prepares to give his first Autumn Budget, against a difficult fiscal backdrop.

Further AI-linked sell-offs

Earnings updates in the US fuelled a further sell-off for AI-linked companies. Industry bellwethers such as Nvidia and Meta declined. Cloud-computing provider CoreWeave has proved particularly weak, falling by 40% over the month and 78% in a year. Even as the AI potential is driving technology companies to spend billions of dollars building data centres, investors are increasingly questioning whether the eventual demand will be there. Rising borrowing costs are adding to the pressure, especially for companies with high levels of debt. 

SJP’s Equity Strategist, Carlota Estragues Lopez, highlights that “recent market wobbles reflect growing scrutiny of valuations and returns on investment, rather than a loss of confidence in the technology.”

This could have implications for the planned stock market listings of Anthropic, the company behind Claude and OpenAI, which owns Chat GPT. Analysts report that slowing third-quarter sales growth at Anthropic could weigh on the company’s valuation ahead of its November initial public offering. This would also have implications for OpenAI’s expected listing in 2027.  

It’s not just high valuations and debt levels that investors have to contend with. Last week’s security flaws in PHP, software widely used globally to operate websites, have increased fears of cyberattacks. This heightened nervousness may increase demand for cybersecurity products.  

UK inflation jumps in September, consumer holds back

The UK’s headline inflation rate rose to 3.5% in September, from 3.1% in August. With oil prices reaching multi-year highs, fuel costs were a major contributor, while airfares also increased significantly. 

This has reinforced expectations that the Bank of England’s Monetary Policy Committee will increase interest rates at its next meeting on 5 November 2026. 

The inflation pickup comes at an awkward time for consumers. UK retail spending slowed in September, with sales volumes dropping more than analysts had expected. The warm start to autumn affected clothing sales, while higher fuel prices squeezed households. 

The pound has already strengthened in anticipation of a rate hike, although a stronger currency can create headwinds for UK exporters by making their products more expensive for overseas buyers. 

No relief for French government bonds 

Investors continued to sell French government bonds (OATs) as the civil unrest compounded the unattractive fiscal backdrop and uncertainty ahead of next year’s presidential election. The yield on the 10-year OAT rose above 5%, its highest level since 2002, although the premium that investors demand for investing in OATs has eased to 160 basis points (bps), which could help stabilise the country’s debt trajectory. France, the second largest economy in the eurozone, now has higher borrowing costs than Italy or Greece. Greg Venizelos, SJP’s Fixed Income Strategist says: “Given the political uncertainty and effective decision vacuum until next May’s presidential election, buying French bonds now feels more like a trader’s trade than a long-term investor’s trade.”

The country’s fiscal picture is bleak. At 5.4%, the French budget deficit is well above the eurozone average and the European Union’s 3% limit. Its economic growth this year will lag the eurozone. Investors are concerned that the polarised domestic political situation will make it more difficult for a government to be formed which would stabilise the country’s debt. 

There was some good news at the end of the week – credit rating agency Moody’s kept France’s credit rating unchanged despite the debt level and political fragmentation. This suggests that Moody’s remains confident that France will be able to service its debts. While France’s rating is below that of the US and Germany, it is above that of Italy and Spain and the same as that of the UK.   

Autumn Budget: how hard will the axe fall?

The Autumn Budget is only days away. Households, investors and business owners are all poised to hear Chancellor John Healey’s plans to boost the UK economy.

There have been fewer rumours and pre-Budget announcements than in previous years.

However, while some measures have been confirmed ahead of the chancellor’s speech on Wednesday, others remain the subject of speculation. Here’s what we know so far:

• Cutting costs for small businesses: although no specific measures have been announced, Healey has pledged to reduce costs for businesses. This could include cutting red tape and regulations, which many business owners say holds back growth. 
• No capital gains tax increases: the chancellor has confirmed there will be no increase to the tax rates on capital gains in this Budget.
• Support for first-time buyers: a new scheme for first-time buyers will offer government-backed equity loans of up to 20% for purchasers of new-build properties who can provide a deposit of at least 2.5%.
• Bank levy: although not a confirmed measure, reports suggest the chancellor is considering raising taxes on UK banks as part of efforts to increase revenues and offset rising costs.

On the day of the Budget, 28 October, we will publish an overview of the chancellor’s key announcements, along with analysis of the economic implications of any decisions.

In the days that follow, we will also provide more detailed coverage of specific Budget measures and what they could mean for different groups, including business owners and other taxpayers.

St. James's Place will also host a webinar on 2 November, where experts will discuss the broader implications of the Budget measures. You can register for the webinar here.