Global markets tumbled on Thursday and Friday as investors grappled with mounting economic uncertainty in both the US and the UK, raising fresh fears of a potential recession in the world’s largest economies.

US stocks erased roughly $1 trillion in value on Thursday, with major indices posting steep declines. The S&P 500 fell 1.66% to 6,737.49, the Nasdaq dropped 2.3%, and the Dow Jones Industrial Average slid 1.7% to 47,457.22. Experts at Kalshi, an exchange and prediction market, pointed to a string of high-profile developments as contributing to volatility. In a post on X, Kalshi wrote: “Slowly, then all at once: Nancy Pelosi announces her retirement, Warren Buffett says he’ll no longer write the Berkshire annual letter, Michael Burry announces the closure of his fund, the White House says last month’s jobs report will likely never be released, Bitcoin falls below $100,000, and Verizon just cut 15,000 jobs.” These events, coupled with ongoing economic concerns, have traders bracing for a potential downturn. Kalshi traders now forecast a “30% chance of a recession” in the US next year.

Traders on Kalshi are also predicting recessions in the UK, Japan, China and India.

In London, the FTSE 100 fell over 1% on Friday, underperforming broader European markets. The slide was linked to a surge in UK gilt yields and a weaker pound, following reports that Chancellor Rachel Reeves may abandon planned income-tax hikes in the November 26 autumn Budget.

The 10-year UK gilt yield, which initially jumped 13 basis points to 4.57%, later pared back to 4.513% after clarification that the move was driven by an improved fiscal forecast from the Office for Budget Responsibility (OBR).

The OBR now estimates the Budget shortfall at around £20billion, down from a previous £35billion.

Ms Reeves is instead expected to pursue revenue-raising measures such as threshold adjustments and salary-sacrifice reforms, keeping Labour’s pledge not to raise headline income-tax rates intact.

She had reportedly prepared two budget options, one with major tax hikes and another relying on smaller measures.

The uncertainty around the UK Budget, combined with rising gilt yields, prompted money markets to scale back expectations for Bank of England rate cuts to under 60 basis points by the end of 2025.

Sterling also weakened on Friday, down 0.3% to $1.313 and 0.3% lower at €1.128.

According to Nigel Green, CEO at DeVere, a weaker pound “amplifies inflation pressures through higher import costs, deepens the economic strain on households, and complicates the policy environment for both the Treasury and the Bank of England”.

He said: “When the pound falls alongside gilts, you’re watching international investors turn away from the UK.

“This shift raises borrowing costs across the economy and increases the risk of a deeper slowdown. Confidence in fiscal leadership is everything in this moment.”