Gilts and Sterling Roiled by Another Classic U.K. U-Turn

Global markets have swung risk-off amid U.K. policy turmoil, weak Chinese data, crypto stress, and Tech profit-taking.

Key Takeaways

• Markets Turn Risk-Off as Global Pressures Mount: The risk-off trade is back, but there is no capitulation yet with the VIX at 21.1. A tax policy U-turn in the U.K. has wreaked havoc on sterling and gilts. A set of weak Chinese data have triggered a setback for Asian stocks and the base metals complex. Bitcoin entered an official bear market and is facing huge ETF redemptions, while gold is holding its value. The Tech sector is seeing a sustained wave of profit-taking, and the S&P 500 is now engaged with a crucial test of the 50-day moving average.

• Hawkish Fed Talk Reprices Early 2026 Easing: The FOMC hawks who think the entire weakness in the labor market is related to supply constraints and that inflation, a classic lagging indicator, is still too far above target, have now successfully nudged the swaps market to price in about 50% odds of a December Fed rate cut. While there are still three cuts being discounted for 2026, the first one is priced fully now for March instead of January.

• The Hidden Costs of Big Tech’s AI Boom: The best read of the day, the week, the month, and probably the year, goes to the Wall Street Journal’s James Mackintosh, who I can say is one of the few business journalists who knows what’s going on and is not scared to write about it. I am talking about Big Tech’s Soaring Profits Have an Ugly Underside: OpenAI’s Losses with a tag line just as powerful (“What’s only starting to become clear is that AI startups are also sinkholes for losses”).