Europe close: Stocks fall as earnings reports roll in
By Josh White
Date: Tuesday 04 Nov 2025
(Sharecast News) - European equities fell sharply on Tuesday as investors adopted a risk-off stance amid renewed fiscal uncertainty in the UK and weak corporate updates across the continent.
The pan-European Stoxx 600 dropped 0.3% to 570.58, led lower by losses in Frankfurt and Paris.
Germany's DAX fell 0.76% to 23,949.11 and France's CAC 40 declined 0.52% to 8,067.53.
London's FTSE 100 outperformed slightly, edging up 0.14% to 9,714.96, supported by strength in oil majors.
Rachel Reeves refuses to rule out UK tax rises
Markets turned cautious as British finance minister Rachel Reeves refused to rule out tax rises to plug a fiscal gap of up to £30bn.
In a closely watched speech ahead of her 26 November Budget, Reeves said she would not increase spending and reaffirmed her commitment to "ironclad" fiscal rules, warning that there were limits to how much investors would pay for government debt.
UK bond yields fell, with the 10-year yield down 4.5 basis points to 4.39%, while sterling weakened to a six-month low of $1.3064.
"The more we try and sell, the more it will cost us," Reeves said, adding that the government could not "sweep challenges under the carpet."
Patrick Munnelly, market strategy partner at TickMill, noted that "markets remain concerned about Reeves's ability to meet fiscal rules without bending - if not outright breaking - the spirit or letter of those manifesto promises."
He added that "recent market movements suggest investors have already priced in the likelihood of tough fiscal measures," highlighting that "over the last three weeks, the 30 basis point tightening of gilt spreads against US Treasuries in the 10-year sector appears to reflect expectations of the government's commitment to fiscal discipline."
Goldman Sachs analysts said credible steps to rein in the deficit could lower yields by up to 0.2 percentage points, while the Resolution Foundation warned Reeves's £10bn of fiscal headroom had "evaporated" amid a weaker economic outlook and u-turns on spending cuts.
The Office for Budget Responsibility is expected to downgrade its UK productivity forecasts, creating an additional £20bn shortfall.
AJ Bell's Dan Coatsworth said Reeves's comments "left investors with more questions than answers," adding that "many people are fed up with this game" and expect clear decisions on taxation.
Coatsworth added that "the bond market would be happy if the chancellor raises taxes as it would help to improve public finances and make the UK less risky from an investment perspective."
He noted that "it was telling that the 10-year gilt yield fell as Reeves began her speech, indicating that bond investors thought we'd get confirmation that taxes would go up at the Budget.
"But as it became clear that Reeves was merely dancing around the topic, yields went back up."
Munnelly also said the Treasury's stance "may already be baked into market sentiment," but warned that "the less predictable factor remains the potential political fallout - whether in opinion polls or among MPs - and how that could influence the long-term trajectory of the current fiscal strategy."
Telefonica tumbles, BP manages to close with gains
In corporate news, Spain's Telefonica tumbled 13.12% after the telecoms group halved its dividend under a new strategy, while France's Edenred sank 8.58% after warning of slower profit growth.
On the upside, BP gained about 1.4% as the oil major posted third-quarter underlying replacement cost profit of $2.21bn , beating analyst expectations.
AJ Bell's Dan Coatsworth said: "In a timely boost for embattled BP CEO Murray Auchincloss, BP has posted better than anticipated quarterly figures," adding that "a $750m buyback provides some reward for BP investors' patience as management look to turn around a super tanker of a business."
Dutch health-tech group Philips climbed 3.46% after reporting third-quarter net income of €187m on revenues of €4.3bn.
Spain unemployment rises by smaller amount than usual
On the economic front, Spain's unemployment rose by 22,101 in October, a smaller-than-usual seasonal increase and the lowest October total since 2007.
In monetary policy news, the Reserve Bank of Australia left its cash rate unchanged at 3.6% but raised its inflation forecasts, saying recent data suggest "some inflationary pressure may remain" despite progress since 2022.
Munnelly noted that "the Australian dollar weakened after the Reserve Bank of Australia held interest rates steady," reflecting investor disappointment at the absence of a more hawkish tone.
Reporting by Josh White for Sharecast.com.
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