WeekWatch - 02/11/2026
Last month's highlights
- French fixed income spent much of the month squarely in the market’s crosshairs. The high deficit and national debt combined with upcoming electoral uncertainty have increased investor uncertainty and increased borrowing costs.
- In the UK, Healey’s inaugural budget caused little reaction from markets.
- Global energy prices climbed as investors speculated about a possible intensification of the Iran conflict.
Stock Take
The price of confidence: a tale of three markets
UK chancellor John Healey could breathe a sigh of relief on Wednesday afternoon after market reaction to his first Budget was muted.
In the run up to the Budget, Healey had been at pains to avoid being painted as anti-business. But thanks to higher government borrowing costs and the deficit, investors knew some tax rises were on the way.
In the end, the worst fears were avoided. An additional 3% banking surcharge for 15 months from the start of next year was less than feared and, as a result, shares in larger banks rose.
Bond investors responded calmly to the Budget. 10-year gilt yields have now been trending lower since peaking in early October, in an encouraging sign for the government.
Brazilian market falls
For an example of how markets react badly, look no further than Brazil. There, markets fell notably after left-wing President Lula’s re-election surprised markets. Based on initial voting polls, his right-wing opponent had been expected to claim victory.
While his supporters were jubilant, markets were not. Both Brazilian equities and its currency, the Real, fell strongly as news of the results spread.
Brazil is currently experiencing high debt levels and double-digit interest rates. The cost of this growing debt means that any deterioration in fiscal credibility will quickly affect bonds, equities and the currency, as seen last week.
Tunji Adeniyi, Multi-Asset Strategist at St. James's Place, said: “Fiscal policy is the key market variable, not Lula’s election victory itself. Investors are primarily focused on whether the administration can maintain fiscal discipline, contain deficits and preserve debt sustainability.
“It’s important to note, however, that Brazil’s institutional framework provides an important check on policy risk. A more centrist and centre-right
Congress may constrain aggressive spending plans, meaning policy outcomes are likely to reflect compromise.”
As well as these institutional checks, the Brazilian market has a substantial commodity export market and a strong, independent central bank that should help long term. The market is also home to some attractive valuations and high-quality fund managers.
The balance between Brazil’s fiscal concerns and these strengths are what will shape its trajectory in the coming years.
Google sparks tech flight
Brazil wasn’t the only market to suffer a setback last week. A number of tech stocks also witnessed notable drops.
The key spark appeared to be Google’s third-quarter results. Despite posting some healthy figures (such as its cloud business doubling), they were not enough to compensate for notable misses and failed to meet investors’ expectations.
Earnings per share and revenues both missed expectations. Chief business officer Philipp Schindler admitted Google’s own AI summaries were eating into its search advertising revenue.
Alphabet is investing hundreds of billions into AI. To fund this, it is increasingly having to turn to debt markets to fund this expansion. Therefore, any hint of slowing profits suggests a need to borrow more.
Following the release, the company’s shares plummeted 12% (roughly USD$500 billion) to a six-month low.
It was not alone, however. Amazon shares took a hit after it released its results. Meanwhile Reddit and Intel both declined by around 30% over the week.
Microsoft, which also released its third quarter results last week, was one of the few to emerge unscathed. Unlike Alphabet, its revenue growth beat
expectations, powered by the impressive performance of its Azure cloud platform.
Microsoft aside, it was a difficult week for tech.
Where is Lagarde lagoing?
Finally, the European Central Bank last week voted to keep interest rates flat within the eurozone. The move had been widely expected. With inflationary pressures still high, one more rate hike is expected in the coming months.
What was less expected was ECB president Christine Lagarde announcing her intention to step down in February, nine months before her eight-year term is due to end.
Lagarde noted that she could no longer remain neutral over developments in France. With a presidential election due in April, this naturally led to speculation the former finance minister is contemplating a run for office.
Wealth Check
The Budget aftermath
As the dust settles after last week’s Autumn Budget, we look back at the key changes for savers and buy-to-let landlords, prospective homeowners and business owners.
- An increase to tax rates on savings and property income
The tax rates applied on income from savings (outside an ISA) were already set to increase by two percentage points next April across all tax bands. But the chancellor, John Healey, has added an extra two percentage points.
These changes, from April 2027, will result in a 24% rate for basic rate taxpayers, 44% for higher rate taxpayers and 49% for additional rate taxpayers, up from 20%, 40% and 45% respectively.
Rental income will be subject to the same rates.
There was no change to the personal savings allowance.
- A reversal of the cut to the cash ISA limit
The proposed cut to the cash ISA limit for savers under the age of 65 will be scrapped. This means all savers can continue to save up to £20,000 in cash ISAs each tax year. This is good news for first-time buyers, many of whom use cash ISAs as a tax-efficient way of saving a deposit towards their property purchase.
- Support for first-time buyers
The government is launching a new scheme next spring to help first-time buyers purchase new build homes in England where they only have a small cash deposit.
Under Your First Home, which is similar to the predecessor scheme Help to Buy, eligible buyers will need a deposit of at least 2.5% of the purchase price. The government will then provide an equity loan worth 20% of the purchase price, interest free for five years.
The chancellor also announced a new first time buyer ISA will launch in April 2029 to replace the Lifetime ISA, helping more people onto the property ladder.
- A reduction to business asset disposal relief
Healey had less positive news for those looking to sell their business.
Specifically, he halved the lifetime limit for capital gains eligible for business asset disposal relief (BADR). The limit will be cut from £1 million to £500,000.
There was no change to the rate of BADR, which remains at 18% for disposals in the 2026/27 tax year.
- An increase to rates relief and valuation thresholds
From 1 April 2027, the threshold for small business rates relief will rise from £12,000 to £18,000 for 100% relief, and from £15,000 to £21,000 for tapered relief. The Treasury estimates this will mean as many as 70,000 smaller businesses will no longer have to pay any business rates.
As expected, Healey announced the government will provide an additional 20% relief for pubs, social clubs and a large number of music venues from 1 April 2027.
Based on the current support the government introduced earlier this year, this brings the total relief for eligible businesses in the hospitality sector 35%.
Cash ISAs are not available through St. James's Place.
In The Picture
Last week, Luiz Inácio Lula da Silva secured a return to Brazil’s presidency, despite some polls suggesting a stronger showing for Flávio Bolsonaro. The latter was generally perceived as the more fiscally austere candidate.
Brazilian equities fell around 18% on the day as investors weighed the implications for fiscal policy and the country’s growing budget deficit. The market reaction suggests that investors will be closely watching to see if the new administration can maintain fiscal discipline while pursuing its economic agenda.
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