London stocks shook off a mostly weaker session to end just higher on Tuesday, as sterling slumped on the back of Chancellor Rachel Reeves' pre-Budget speech, but gains were muted amid concerns about a potential stock market correction.
The FTSE 100 ended up 0.1% at 9,714.96, while sterling was down 0.8% against the dollar at 1.3030, after Reeves hinted at income tax rises in her speech.

A weaker pound tends to benefit the top-flight index, as around 70% of its constituents derive their earnings from overseas.

In a speech ahead of the Budget on 26 November, Reeves sought to reassure markets that there would be no major rise in spending but also refused to rule out any tax increases as she faces a spending black hole of up to £30bn.

Reeves said more challenges had emerged since her last that Budget, citing the "continual threat of tariffs" which had hit global confidence "deterring business investment, and dampening growth", along with persistent inflation, increases in the cost of government borrowing and defence spending.

She added that the commitment to her self-imposed fiscal rules was "ironclad", warning that there were limits on the price that banks, hedge funds and pension investors were willing to pay for government debt.

"The more we try and sell, the more it will cost us. It is important that everyone - the public and politicians - understands that reality. The less we spend on debt interest, the more we can spend on the priorities of working people," she said.

Reeves said she would not avoid making difficult choices, in yet another sign that the government is prepared to break pledges not to increase income tax, VAT or national insurance.

"I could do what previous governments have done, which is to sweep those challenges under the carpet, to cut capital spending, to make the numbers up," she told reporters after the speech.

"But then we'd be back here in a year, in five years' time, with productivity still on its knees, growth under-performing, national debt continuing to rise. So I'm being honest with people."

Of the broader selloff that took place earlier on Tuesday, Axel Rudolph, senior technical analyst at IG, said: "Global stock indices pulled back from their recent record highs as the last few days' AI-driven rally ran out of steam and investors cashed in profits amid comments from several Wall Street chief executives warning of a correction.

"While fresh corporate earnings were mixed and US logistics growth remained steady, economic sentiment dropped to a 17-month low, putting further pressure on stocks."

In equity markets, BP rose as the oil giant beat market forecasts with its third-quarter earnings and said it expects divestment proceeds to be higher than previously expected.

Underlying replacement cost profit totalled $2.21bn, down from $2.35bn in the second quarter and $2.27bn in the third quarter of 2024, as improved profitability was offset by a higher underlying effective tax rate.

However, that was ahead of the consensus forecast of $2.02bn. Meanwhile, the company said divestments and other proceeds would now be above $4bn in 2025, ahead of previous guidance of $3-4bn.

Diversified Energy surged after the gas producer boosted full-year guidance following a strong third quarter.

On the downside, Associated British Foods slumped after saying it could split its Primark and food businesses under a review of its group structure currently underway in consultation with its biggest investor Wittington Investments, which remains committed to maintaining majority ownership of both businesses.

The company added that Primark's adjusted operating profit margin was expected to be slightly below last year as it focused on investing in growth to drive sales after posting a 26% fall in profit to £1.4bn for the year to 13 September amid a subdued consumer environment.

Heavily-weighted miners were also under the cosh as copper and iron ore prices fell, with Antofagasta, Anglo American and Glencore all lower.

IWG and Domino's Pizza were also weaker after trading updates.