London midday: FTSE falls further as investors mull prospect of spending cuts, tax rises

(Sharecast News) - London stocks had extended losses by midday on Wednesday as investors mulled the prospect of tax rises and spending cuts in the next Budget.

The FTSE 100 was down 0.6% at 9,399.78, underperforming peers in Europe, where the Stoxx 600 benchmark index rose 0.7% and France's CAC 40 gained a whopping 2.5% as LVMH led the luxury sector higher after solid quarterly results.

Joshua Mahony at Scope Markets said the UK index was "weighed down by renewed fiscal concerns after the chancellor warned of significant tax rises and spending cuts that could go further than required to plug the public finance gap".

"While such measures may reduce the risk of repeated tax hikes later in her tenure, they also raise fears of fresh pressure on UK growth," he said.

"The IMF offered some encouragement with an upgraded 2026 growth forecast of 1.3%, but with inflation restricting Bank of England support, and fiscal tightening on the horizon, the outlook for a meaningful improvement in momentum remains limited."

Investors were also mulling the latest comments from US President Donald Trump, who suggested on Tuesday that he was considering ending certain trade ties with China, including cooking oil imports, as a response to reduced US soybean purchases by China.

Danske Bank said: "The move highlights escalating trade tensions, with Washington and Beijing already at odds over tariffs, supply chains, and broader geopolitical issues."

Across the Pond, earnings were due from Bank of America and Morgan Stanley following a raft of bank earnings on Tuesday.

In UK equity markets, defence stocks fell, with Babcock and BAE Systems both weaker, while Jupiter Fund Management and Rathbones also lost ground after updates.

Gambling and gaming giant Entain retreated even as it reiterated its full-year guidance, despite a slew of customer-friendly results during the third quarter.

On the upside, luxury fashion brand Burberry shot to the top of the FTSE 100 after third-quarter number from France's LVMH impressed. Luxury watch retailer Watches of Switzerland also rallied.

Pets at Home was faring well, up 4% after the Competition and Markets Authority said that vets should be made to publish prices so customers can look around for the best deal, and suggested price caps on prescriptions.

On the whole, the provisional findings of the CMA's two-year investigation and suggested remedies threw up no surprises.

Derren Nathan, head of equity research at Hargreaves Lansdown, said: "The outcome is broadly as expected, but with no major negative surprises should alleviate the uncertainty that's been weighing on consumer and investor sentiment.

"That's seen a share price increase for Pets at Home, with its growing veterinary offer, and a bigger spike for CVS Group, which is more of a pure play on the industry. That said, the line under the matter has only been pencilled in so far. A further consultation is underway and a deadline for publication of the final decision has been set for March 2026."

Elsewhere, recruiter PageGroup surged as it reported a drop in third-quarter profit amid a more challenging market in Europe, but said 2025 operating profit was expected to be broadly in line with current market consensus of �21.5m.

British Land also rose on the back of a well-received trading update.