The FTSE 100 Index rose by nearly 1% as UK bond yields plunged, as the market reacted to the latest budget reading by Rachel Reeves. The index, which tracks the biggest UK companies, rose for the second consecutive day, reaching a high of £9,690, its highest level since November 17. 

FTSE 100 Index and Sterling jumps as UK bond yields sink

The blue-chip FTSE 100 Index rebounded as investors reacted to Rachel Reeves budget speech in which she raised taxes by billions of pounds.

Sterling continued its recent recovery, with the GBP/USD exchange rate rising to 1.3255, its highest level since October 29. Similarly, the EUR/GBP pair dropped to 0.8750, its lowest level since October 28. Sterling also jumped against other currencies like the South African rand and the Swiss franc.

Most importantly, the bond market surged as Reeves’ budget proposal raised money that may stabilize the country’s finances over time. The 10-year UK government bond yield dropped to 4.42% from this week’s high of 4.622%.  

Similarly, the five-year yield dropped to 3.878%, its lowest level since November 13, while the closely-watched two-year fell to 3.70%.

Most FTSE 100 Index companies were in the green after her budget proposal. St. James Place stock price jumped by 5.30%, while Fresnillo, Endeavor Mining, Marks & Spencer, JD Sports, Lloyd’s, and Barclays jumped by over 3%. UK bank stocks jumped as Reeves abandoned the idea of a windfall tax.

Concerns on UK growth remains

Still, in the long term, Reeves’ budget proposal may have a negative impact on the economy. For one, she raised taxes by about £26 billion, with most of these funds going towards welfare spending.

Companies will have to pay a higher minimum wage, which may impact small and medium-sized businesses, while some notable names in areas like manufacturing may decide to shift operations out of the country.

Reeves also introduced a mansion tax that will levy a fee to people with houses valued at over £2 million. While this levy may raise billions of dollars, it may reduce the incentive of companies in the property industry to build. Also, there are chances that richer people will start moving out of the UK to other countries.

Most importantly, the budget did not offer any catalyst for boosting economic growth in the long term. Indeed, the OBR estimated that the economy will grow by 1.5% in 2029, down from the previous estimate of 1.5%. In a statement, one executive quoted by the FT said:

“There is nothing for growth in this Budget, the only thing they have done is increase the size of the public sector again — which is not the side of the economy responsible for growth.”

At the same time, there is a risk that the budget will fuel inflation in the coming weeks as companies will shift the tax increases to consumers. For example, estimates are that the average tax bill of a small shop will rise by between 40% and 65% next April.

Footsie 100 Index technical analysis 

The daily timeframe chart shows that the FTSE 100 Index has rebounded sharply in the past few months, moving from a low of £7,551 in April to the current £9,690.

It recently formed a doji candlestick pattern, which explains why it has rebounded in the past few days.

The FTSE 100 Index has jumped above the 50-day and 100-day Exponential Moving Averages (EMA)and the Supertrend indicator. 

It has moved above the ascending trendline that connects the lowest swings since June this year, a sign that bulls are in control.

Therefore, the most likely FTSE 100 Index is bullish, with the initial target being the all-time high of £9,945. A move above that level will point to more gains, potentially to the psychological level at £10,000.

On the other hand, a move below the ascending trendline will invalidate the bullish outlook and point to more downside, potentially to £9,400.

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The Flutter Entertainment share price is having a bad year, a situation that may worsen after the latest UK budget by Rachel Reeves. Its UK shares were trading at 15,125p on Thursday, down by 35% from the year-to-date high.

Flutter Entertainment faces a £500 million headwind

Flutter, the parent company of Fanduel, Sky Betting, Paddy Power, Sisal, and Betfair, has come under pressure this year as signs of slow growth emerge. Its retreat has mirrored that of DraftKings, whose stock has dived by 40% from the highest point this year.

Flutter Entertainment is now dealing with another major headwind after Rachel Reeves boosted taxes in the industry. She boosted the remote gaming duty that is levied on online casinos from 21% to 40% starting from next April. Online betting levies will soar from 15% to 25%. 

Reeves believes that the new duties will raise £1.1 billion a year in taxes, a move that will affect the profitability of these companies. Flutter, as the biggest company in the industry, will suffer the most, with analysts pricing in a £500 million hit in its profits. Entertain, another top company in the industry, will suffer a £150 million hit.

Revenue growth has slowed

The new taxes on the industry come at a time when growth in the industry has slowed after the pandemic boom. The most recent results showed that its revenue rose by 9% in the third quarter to $3.7 billion. Most of this revenue was driven by its iGaming revenue, which rose by 44%.

Flutter’s Sportsbook revenue dropped by 5% as competition soared in the United States. The management blamed this situation to the uneconomic generosity from its competitors like DraftKings in the US.

Flutter made a giant loss of $789 million because of its woes in India and the $205 million it paid to Boyd to revise its US terms. 

The management expects that its revenue will be $16.69 billion this year, with an adjusted EBITDA of $2.9 billion. Its forward guidance was lower than what it had predicted as the management included the negative impact on Illinois’s wager tax and India’s regulatory change. The CEO said:

“Our diversified portfolio and disciplined approach give me great confidence in our ability to lead the industry and increase long-term value for shareholders.”

The company is betting on the booming prediction market for growth. It will launch the FanDuel Predicts product in December as it seeks to compete with companies like Polymarket and Kalshi. However, the risk is that the industry has become highly saturated.

Flutter share price analysis

FLUT stock chart | Source: TradingView

The daily timeframe chart shows that the Flutter stock price has been in a strong downtrend in the past few months. Its crash coincided with the ongoing headwinds, including its woes in India and the United States.

Flutter Entertainment stock has recently formed a death cross pattern as the 50-day and 200-day moving averages crossed each other on October 27. 

The stock is now slowly forming a bearish flag pattern, which is made up of a vertical line and a rectangle channel. Worse, this channel is part of the inverse cup-and-handle pattern, a common continuation sign. 

Therefore, the most likely scenario is where the stock continues falling, as investors target the key psychological point at 10p. 

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Carnival share price suffered a harsh reversal this week, falling to the lowest level since June 24. It has dived by 24.35% from its highest point this year, erasing billions of dollars in value as its market capitalization dropped from the year-to-date high of $42.3 billion in September to $32 billion today.

The ongoing Carnival stock crash aligned with the performance of other companies in the industry. Royal Caribbean’s stock price dropped by 3%, bringing its market capitalization to $69.7 billion, while Norwegian Cruise fell by 2%. Viking Holdings stock was largely unchanged.

Why Carnival share price dropped 

Carnival stock price retreated after some notable industry experts delivered a cautious outlook about the industry. In a note, a Barclays analyst said that Carnival’s management had conveyed a cautious tone during a recent trip to the AIDAdiva vessel.

Precisely, the management is concerned about the rising capacity in the Caribbean, where top companies like Carnival, Norwegian, and Royal Caribbean are seeking to gain market share.

Carnival stock also dropped amid negative headlines about a recent incident in which Anna Kepner, a teenager, was found dead in her room earlier this month. Authorities now believe that the teen was killed by her stepbrother. Still, while this report is bad news for the company, chances of it having a lasting impact on its business are slim.

Carnival’s business is doing well

Still, fundamentals suggest that the company’s business is doing well, a trend that may continue in the coming months as demand for cruising continues and its valuation continues to be friendly.

Demand for cruising is rising in the United States, led by Gen Z and millennials, with most travelers being less than 46 years old. This is a sharp contrast to what happened before the pandemic when most of the travelers were retirees. Most importantly, these investors are spending and willing to spend more money.

The most recent results showed that Carnival’s net yield rose to 4.6% in the last quarter, higher than its guidance of 3.5%. Most importantly, the cost of its cruise was lower than expected, rising by 5%. Its guidance was a 7% increase.

Meanwhile, the company continued to boost its guidance, raising it for the third time this year. For example, they boosted the full-year net yield to 5.3% and adjusted EBITDA guidance to $7.1 billion, higher than the $6.6 billion in December.

Also, the management’s net income guidance of $2.9 billion was higher than $2.3 billion in December, a sign that the management expects the growth to accelerate.

The company is able to provide relatively accurate guidance because of its  soaring customer deposits and forward bookings. Its customer deposits jumped to $7.1 billion last quarter to $6.3 billion in the same period last year.

Carnival stock has more bullish catalysts, including the growth of its Celebration Key, a destination that has attracted over 500k visitors, a figure that will jump to 3 million next year. It has also expanded its business to China, while its valuation multiples are not all that extreme.

Carnival stock price technical analysis 

The daily timeframe chart shows that the Carnival stock price peaked at $32.82 in August, forming a small double-top pattern.

The stock has now plunged and is about to form a death cross pattern as the spread of 50-day and 200-day Weighted Moving Averages (WMA) has narrowed.

CCL stock price has moved below the important support level at $28.75, its highest point in January this year.

Therefore, the most likely scenario is where the ongoing shakeout continues for a while and then the stock will rebound and possibly retest the year-to-date high of $32.8.

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Zscaler stock price erased the gains made in the regular session after the company published strong results and a mild forward estimate. It initially rose by 3.35% on Tuesday to $290 and then retreated by over 7% to $266.90 in the extended hours. It settled to the lowest point in September. 

Zscaler’s reported strong results and mild guidance

Zscaler, one of the top companies in the cybersecurity industry, is doing well as the ongoing AI boom drives more demand for its services. Its annual revenue moved from over $673 million in 2021 to over $2.6 billion in the last financial year.

Most notably, the company has continued to narrow its losses in this period. It made a large net loss of $262 million in 2021 to $41 million in the last financial year. 

Its revenue growth continued in the first quarter of the year. Its revenue rose by 26% to $788 million, higher than its guidance of between $772 million and $774 million.

Additionally, the company’s operating profit was higher than its previous guidance. It made an operating profit of $172 million, higher than its guidance of between $166 million and $168 million.

The earnings per share of 96 cents was also higher than its guidance. Historically, Zscaler has always been a conservative company that avoids overpromising. 

More numbers showed that its annual recurring revenue (ARR) rate jumped to over $3.2 billion as companies continued to embrace its technology, especially in the AI security. Indeed, the number of companies paying over $1 million a year rose to 698 from 491 in the second quarter of last financial year.

Most importantly, the company has become more profitable, with the operating profit margin rising to 22% and its free cash flow rose to 52%.

The Zscaler stock price dropped as the management’s guidance, while strong, was lower than expected. It expects its revenue will be between $797 million and $799 million, representing a 23% growth rate.

READ MORE: What next for Oklo stock price after the $13 billion wipeout?

For the year, the company believes that its revenue will be between $3.28 billion and $3.3 billion, representing about 23% annual growth rate. The operating profit is expected to be between $172 million and $174 million.

There are chances that the company’s real number will be much higher than its guidance because of its history of outperformance. 

Is ZS valuation justified?

A key concern about Zscaler is that its business is relatively overvalued as its forward price-to-earnings ratio rose to 76, much higher than the sector median of 22. Its multiple is higher than other companies like Palo Alto Networks, Fortinet, and Snowflake.

This valuation metric is mostly because of its strong and consistent growth over the years and the fact that the company has now become profitable. 

Still, the company’s rule-of-40 metric points to the company being less overvalued. Its forward revenue growth is ~23%, while its operating profit and free cash flow margins are 22% and 26%, respectively. This gives it a rule-of-40 multiple of 45% and 49%, respectively. That is a sign that the company is not all that expensive.

Zscaler stock price analysis 

The daily timeframe chart shows that the Zscaler stock price peaked at $336 earlier this month and then tumbled to a low of $268. After rising to $290 on Monday, the stock tumbled to $266 after its earnings.

This crash happened as the company formed a double-top pattern at $317 and a neckline at $260. A double-top is one of the most popular bearish patterns.

Therefore, the stock will likely retreat, potentially to $250, and then resume the uptrend as investors start to buy the dip. Over time, the stock will likely retest the key resistance level at $317.

READ MORE: Plug Power stock price has crashed: is it a bargain or a value trap?

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UK bank stocks popped by over 3% on Tuesday as investors waited for the upcoming Rachel Reeves budget reading and as traders anticipated more returns. 

Lloyds share price jumped by 3.78% to 90.69p, up from this week’s low of 85.86. It has jumped by over 80% from its lowest level this year.

Barclays stock price rose by 2.36% to $410, up by 85% from the year-to-date low, while Natwest soared by 3.75%. NatWest stock has jumped by 75% from its lowest point this year. Other bank stocks like Standard Chartered and HSBC also soared.

Barclays, NatWest, and Lloyds share prices rose ahead of Rachel Reeves speech 

The main reason why the Barclays, NatWest, and Lloyds share price jumped as traders waited for the upcoming Rachel Reeves budget speech. 

According to Bloomberg, Reeves, the unpopular Chancellor of the Exchequer, has decided not to introduce a windfall tax on the country’s banks.

She will also not increase taxes on the industry, a move she expects will boost the sector and spur lending in the economy.

Additionally, she will not make changes to the banking levy, which is known as the surcharge. As was widely expected, Reeves will not introduce a new tax on banks income from reserves.

The new reporting came a few months after an influential think tank argued that introducing a windfall tax would help the country move from the multi-billion pound deficit into a surplus over the years.

The think tank pointed to the substantial profits the banks have made in the past few years, helped by structural hedges, which help to reduce sensitivity to interest rates.

On the other hand, banks have argued that imposing more taxes would make the country and the financial sector less attractive considering that they already pay more than their European counterparts.

UK banks investors eye sweeteners amid rising pessimism

Lloyds, Barclays, and NatWest investors are also hoping that the companies will unveil more policies to boost returns, as investors caution that the bull run may be about to run out of steam. Just recently, Unicredit’s Andrea Orcel warned:

“As we go into 2026, it is going to be tougher for European banks. I think net interest income will be more brutal than people expect.”

Some European banks have started offering sweeteners as the recent rally fades. For example, BNP Paribas and Société Générale recently announced an accelerated share repurchase program, giving investors €2.5 billion earlier than expected.

Additionally, Deutsche Bank announced new targets, which pointed to higher returns and payouts to investors.

UK banks published strong financial results recently, with the only blemish being the multi-million-pound provisions because of the motor insurance scandal.

Lloyds Bank said that its statutory profit after tax was £3.3 billion, even as it reported a £800 million charge related to the motor insurance issue. Its underlying net interest income in the first nine months of the year rose by 6% to £10.1 billion.

NatWest also published strong results, with its total income rising to £4.2 billion in the first nine months of the year and its impairment charges falling to £153 million.

Barclays, on the other hand, reported strong financial results as its profit before tax rose by 4% to £2.5 billion, helped by its investment banking division. However, its credit impairment charges jumped to £334 million from the £82 million.

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The Nifty 50 Index has jumped to a record high this year despite the Indian economy facing major challenges, including tariffs, retail investors selling, and a plummeting rupee. It was trading at ₹26,167 on Wednesday, a few points below the all-time high of ₹26,260.

Indian retail investors are dumping shares

The Nifty 50 Index is sitting near its all-time high even as retail investors continued dumping the shares.

Data compiled by Bloomberg shows that these investors have dumped shares worth over $2.2 billion so far this quarter, a sign that they expect the downtrend to accelerate. The last time they dumped shares this much was in June 2023.

One reason do the selling is that the Nifty 50 index has underperformed other global indices. It has jumped by just 10% this year while other indices like the KOSPI and Nasdaq 100 have had a better performance.

At the same time, some of these investors are rotating to other better-performing assets like gold and silver.

Additionally, there are lingering concerns about the Indian economy, which explains why the Indian rupee has plunged to the lowest level on record.

Also, traders are concerned that a trade deal between the US and India is taking too long to be sealed. In the meantime, Indian exporters to the US are having to pay a 50% tariff.

At the same time, unlike in Japan and South Korea, Indian companies are not highly exposed to the artificial intelligence industry.

Therefore, analysts believe that the Indian stock market needs some good news to continue its strong rally. One of these news is a potential deal between the US and India, and an adjustment on the H1-B visa fee. Also, a potential interest rate cut by the Reserve Bank of India (RBI) would help the stock market.

Most Nifty 50 Index companies have done well in the past 30 days. Shriram Finance stock has been the best-performing company in the index after soaring by 18%. Asian Paints stock has jumped by 15%, while State Bank of India, Reliance Industries, HCL Technologies, and Eicher Motors have jumped by over 5%.

On the other hand, Tata Motors, Trent, Cipla, Apollo Hospitals, and Bajaj Finance have plunged by over 8% in this period.

Nifty 50 Index technical analysis 

Nifty 50 Index chart | Source: TradingView

The daily timeframe chart shows that the Nifty 50 Index has been in a strong uptrend in the past few months, moving from ₹21,742 to the current ₹26,170. It is nearing the important resistance level at ₹26,247, its all-time high.

The chart shows that the index remains above the 50-day and 200-day Exponential Moving Averages (EMA) and the Supertrend indicators, a sign that bulls remain in control.

Therefore, the most likely Nifty 50 Index forecast is bullish, with the next key resistance level to watch being at 27,000. This view will be confirmed if the stock moves above the key resistance level at 26,247.

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