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• China data declines lead equities lower
• UK budget may not see income tax hike
• US tech stock slump continues, as Fed take cautious approach

Asian markets closed out the week on a negative footing, as the tech-sector rout from Wall Street spilled across the globe. Meanwhile, a raft of concerning data points out of China saw weak retail sales, industrial production, and home price figures. This had a particular impact on tech-focused consumer firms such as Alibaba and JD.com. The weakness in both consumer and business indicators signalled a need to be cautious in the region, with the AI trade having led the likes of the Hang Seng into a period of prosperity despite questionable underlying economics in China.

European markets have maintained the bearish theme seen in the US and Asia, as financials lead the way lower. In the UK, politics remains in the driving seat following recent claims that Starmer could be pushed out next year. This time we have the Chancellor apparently considering a U-turn on income tax hikes, as she attempts to keep both households and her party onside when she provides her Autumn budget later this month. The strength seen in the pound clearly indicates that markets perceive this move as lessening the likeliness of a rate cut from the BoE, despite the weak GDP figures seen on Wednesday. Nonetheless, the numbers have to be made up somehow, and there will be many questions over the sheer number of measures needed to make up the black hole in the public finances without a major shift in one of the main taxes.

In the US, the relief of a shutdown resolution has quickly given way to frustration: the October data appears to be non-existent, and thus we may have to make do with September's data. In an environment of data dependency from the Fed, there would be a greater reliance on private measures such as the ADP and Challenger figures which were far from impressive. The tech slump looks set to continue as we close out the week, with the Nasdaq expected to fall into the lowest level since last Friday. Monday’s reopening rally proved short-lived, with valuation concerns accompanied by a realisation that the Fed will likely take a cautious approach to easing. Comments from policymakers Musalem, Kashkari, and Hammack all warned that they perceived inflation pressures as a potential cause for rates to remain somewhat restrictive for the time being. With markets now pricing a 47% chance that we see just one cut in the next four-meetings, the Fed look unlikely to help sentiment at a time of concern.

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