▸ Pound jumps against the dol­lar amid signs of strength in UK eco­nomy

▸ US blue-chip and tech-heavy indices inch higher in early trad­ing

▸ Brent crude climbs to $63 a bar­rel while gold remains roughly flat

The pound jumped against the dol­lar yes­ter­day, put­ting it on course for its best day since May, as stronger eco­nomic activ­ity triggered an unwind­ing of neg­at­ive bets against the cur­rency.

Signs of strength in the UK eco­nomy, com­bined with a weaker dol­lar, pushed ster­ling up 0.9 per cent to $1.333, its highest level for more than a month.

A closely watched sur­vey showed yes­ter­day that UK busi­ness activ­ity expan­ded at a stronger pace than expec­ted, paint­ing a rosier pic­ture of the coun­try’s eco­nomy.

The S&P Global UK Com­pos­ite pur­chas­ing man­agers’ index for Novem­ber came in at 51.2, com­pared with ana­lysts’ expect­a­tions of 50.5. A read­ing above 50 indic­ates expan­sion in activ­ity since the pre­vi­ous month.

OpenAI’s huge early lead in the race to dom­in­ate arti­fi­cial intel­li­gence is under the greatest pres­sure since Chat­GPT’s launch, as rivals Google and Anthropic gain ground in the cut­ting-edge sec­tor.

Three years on from the debut of its pop­u­lar chat­bot, the $500bn start-up is grap­pling with the real­ity of soar­ing data centre costs, the tech­nical chal­lenges of remain­ing at the fron­tier of AI and the con­stant battle to retain tal­ent.

It is also facing a resur­gent Google, with the release last month of Gem­ini 3, Google’s latest large lan­guage model, which is con­sidered to have leapfrogged OpenAI’s GPT-5 and achieved gains from the model train­ing pro­cess that have eluded OpenAI in recent months.

“It’s quite a strong dif­fer­ence with the world we had two years ago where OpenAI was lead­ing ahead of every­one else,” said Thomas Wolf, co-founder and chief sci­ence officer of open-source start-up Hug­ging Face. “It’s a new world.”

▸ Global bond yields jump after BoJ gov­ernor hints at interest rate increase

▸ Tech sec­tor leads US stocks down as investors scale back expos­ure to risk

▸ Bit­coin under fur­ther pres­sure and falls 7% to be down 20% in past month

Global bond mar­kets dropped yes­ter­day after the Bank of Japan sig­nalled that it could raise interest rates later this month.

Japan’s two-year gov­ern­ment bond yield jumped above 1 per cent for the first time since 2008 yes­ter­day after Bank of Japan gov­ernor Kazuo Ueda indic­ated that the cent­ral bank might raise interest rates this month. Longer-term debt also fell, with the 10-year yield up 0.07 per­cent­age points to 1.87 per cent.

The jump in Japan­ese yields, which move inversely with price, rippled through fixed income mar­kets, spark­ing declines from Ger­many to the US.

US Treas­ury yields yes­ter­day recor­ded their biggest daily rise in a month, with the two-year yield rising 0.05 per­cent­age points to 3.54 per cent as traders scaled back expect­a­tions of interest rate cuts in 2026. 

Valu­ations of US tech stocks such as Nvidia, Alpha­bet, Microsoft and Meta have become “stretched” as investors are driven by “fears of miss­ing out”, the European Cent­ral Bank said yes­ter­day.

The warn­ing, in the cent­ral bank’s latest Fin­an­cial Sta­bil­ity Review, fol­lows sim­ilar cau­tions from insti­tu­tions includ­ing the IMF and the Bank of Eng­land over high valu­ations of arti­fi­cial intel­li­gence stocks. “Cur­rent mar­ket pri­cing does not appear to reflect per­sist­ently elev­ated vul­ner­ab­il­it­ies and uncer­tain­ties,” the ECB said.

Since the tem­por­ary sell-off in April over US Pres­id­ent Don­ald Trump’s trade tar­iffs, mar­kets had been driven by a “renewed risk-on sen­ti­ment” that had pushed “already high valu­ations even higher”, the ECB said in the review.

It added that investors were either hop­ing that “tail risks will not mater­i­al­ise” or were being driven by “fears of miss­ing out on a con­tin­ued rally”.

▸ US eco­nomic data tops expect­a­tions and pushes global stocks higher

▸ Amer­ican tech stocks return to form, with Nvidia rebound­ing after fall

▸ UK shares close higher after Budget day as chan­cel­lor’s plans wel­comed

Global stocks ral­lied yes­ter­day, fol­low­ing bet­ter than expec­ted US eco­nomic data. The tech-heavy Nas­daq Com­pos­ite index had climbed 1 per cent by early after­noon in New York, with Nvidia rebound­ing

1.7 per cent after the pre­vi­ous day’s falls. The blue-chip S&P 500 was up 0.9 per cent.

Dell rose 6.4 per cent after the tech com­pany raised its annual fore­casts, due to strong demand for its AI serv­ers.

“The mar­ket is digest­ing the Google move,” said Man­ish Kabra, head of US equity strategy at Société Générale, refer­ring to the release of Google’s Gem­ini 3 model, which promp­ted Nvidia’s ini­tial sell-off. “If Google is one of the lead­ing AI con­tenders, it raises expect­a­tions on AI long-term cap­ab­il­it­ies.”

A Budget tax raid on salary sac­ri­fice schemes is set to raise £3bn-£4bn, hit­ting busi­ness and encour­aging employ­ers to cut pen­sion pay­ments to staff.

The move by Rachel Reeves is expec­ted to be one of the biggest meas­ures in next week’s Budget, with people briefed on the plans fore­cast­ing that it will raise more than the £2bn pre­vi­ously floated.

The plan would reduce the amount of money people can sac­ri­fice from their pay cheques to put in their pen­sion pots without pay­ing national insur­ance.

It faces strong push­back from busi­nesses, which would face the brunt of the tax rise and have already seen costs soar as a res­ult of the chan­cel­lor’s decision to increase national insur­ance for employ­ers in her Budget last year.

Last week, Reeves reversed course on plans to break Labour’s mani­festo vow by increas­ing income tax after weeks of pre­par­ing the ground for the move, pla­cing the focus on other meas­ures.

▸ US stocks rebound after tumul­tu­ous week on indic­a­tion of Fed rate cut

▸ Nas­daq climbs after swinging between gains and losses as tech shares fal­ter

▸ European bourses fall, dragged down by Stoxx tech­no­logy sub-index

US stocks reboun­ded at the end of a week marked by erratic trad­ing, after a top Fed­eral Reserve offi­cial lif­ted Wall Street’s hopes for a Decem­ber rate cut.

The tech-focused Nas­daq Com­pos­ite rose 1 per cent in choppy after­noon trad­ing in New York, with the broader S&P 500 1.2 per cent higher.

The moves came after the Nas­daq dropped 2.2 per cent in the most tur­bu­lent trad­ing ses­sion since Pres­id­ent Don­ald Trump’s “lib­er­a­tion day” tar­iff announce­ment sparked huge mar­ket gyr­a­tions in April.

Wor­ries about elev­ated valu­ations for Big Tech groups, which have ral­lied this year, and dimin­ish­ing expect­a­tions that the Fed will cut rates next month have promp­ted sharp pull­backs in recent weeks.

A plan backed by Don­ald Trump to restrict US states from reg­u­lat­ing AI com­pan­ies has pro­voked a back­lash from prom­in­ent Repub­lic­ans and Maga sup­port­ers, and accus­a­tions that he has caved to Big Tech donors.

The US pres­id­ent on Tues­day called for “one Fed­eral Stand­ard instead of a patch­work of 50 State Reg­u­lat­ory Regimes” to sup­port the sec­tor’s growth, des­pite vehe­ment oppos­i­tion from some Repub­lican sen­at­ors and gov­ernors.

The White House is even con­sid­er­ing an exec­ut­ive order that would poten­tially with­hold fed­eral funds from states who attempt to pass AI laws, accord­ing to a per­son famil­iar with the mat­ter.

Trump’s back­ing of a fed­eral frame­work — a pri­or­ity for Sil­icon Val­ley lob­by­ists who fear restric­tions on AI from some states — came two weeks after a group backed by ven­ture cap­ital firm Andreessen Horow­itz and an OpenAI co-founder was formed in Wash­ing­ton in part to fight state-led legis­la­tion.

Build Amer­ican AI’s leader Nathan Leamer vis­ited the White House just hours before Trump announced his decision to back the move that had already ignited out­rage among some Repub­lic­ans.

▸ US tech stocks exper­i­ence tur­bu­lent trad­ing amid valu­ation con­cerns

▸ Wor­ries per­sist des­pite optim­ism over Nvidia earn­ings as Vix fear gauge rises

▸ European stocks close higher, led by Ger­many’s Dax index

US tech stocks dropped yes­ter­day in tur­bu­lent trad­ing as optim­ism over Nvidia’s robust earn­ings was over­shad­owed by a fresh bout of fears over lofty valu­ations for arti­fi­cial intel­li­gence com­pan­ies.

The Nas­daq Com­pos­ite was down about 1.2 per cent in after­noon trad­ing in New York, giv­ing up a gain of more than 2 per cent. The S&P 500 was down

0.9 per cent.

Shares in Nvidia — seen as a bell­wether for the boom in arti­fi­cial intel­li­gence — had ini­tially ral­lied more than 5 per cent after the group pos­ted bet­ter than expec­ted quarterly res­ults late on Wed­nes­day, but slumped 1.1 per cent later in the ses­sion.

The Vix index, Wall Street’s so-called fear gauge, soared from about 20 to 28 in the course of two hours, a sharp move that under­scored the abrupt bout of volat­il­ity that jol­ted US equit­ies mar­kets.

Domestic investors have fled the stock mar­ket at a record rate this year, miss­ing out on a storm­ing rally in which Lon­don has out­paced both US and European bourses.

UK investors have pulled about £26bn from Lon­don-lis­ted equit­ies in 2025, accord­ing to EPFR data, the highest level on record for a cal­en­dar year as meas­ured by out­flows from funds invest­ing in the coun­try.

Nev­er­the­less, the FTSE 100 is on course for its best year since its rebound from the global fin­an­cial crisis in 2009, driven in part by for­eign investors look­ing to diver­sify their expos­ure bey­ond the US and to rel­at­ively cheap valu­ations on the Lon­don mar­ket.

“The UK equity mar­ket is the unex­pec­ted win­ner of 2025 but UK investors don’t seem to care,” said Emmanuel Cau, head of European equit­ies strategy at Barclays.

UK investors pulled £3.4bn from Lon­don stocks via fund with­draw­als in Octo­ber alone, the biggest monthly out­flow of the year.

Ana­lysts attrib­uted the moves in part to next week’s Budget, which is likely to involve tax rises and has promp­ted investors to sell out of the mar­ket and boost their cash reserves.