UK markets advanced further this week, with the FTSE 100 Index gaining 1.5% to trade at 10,250 points at the time of writing. The UK economy beat expectations to grow by 0.3% in November, in a rebound from the previous month’s contraction that was propelled by growth in the services sector and a rebound in manufacturing. The monthly GDP figure from the Office for National Statistics surpassed the 0.1% increase forecast by economists polled by Reuters and the 0.1% decline in October. The figure, the strongest monthly reading since June, was boosted by a 0.3% expansion in services and a 2.1% increase in manufacturing.
The data comes as a boost for the Labour government, which has made growth the centrepiece of its economic agenda. The UK economy had lost momentum since the strong growth of the first quarter of 2025, weighed down by geopolitical uncertainty, elevated borrowing costs, disrupted auto production and anticipation of tax-raising measures in the budget. However, the latest data shows signs of an uptick. In the three months to November, the economy grew by 0.1%, beating expectations of a 0.2% contraction. The figure for September was also revised up to 0.1% growth from an initial estimate of a 0.1% fall.
The data makes a Bank of England rate cut in February less likely, as it gives rate setters concerned about inflation sufficient comfort over economic conditions to delay voting to ease policy again. Nevertheless, UK borrowing costs fell to their lowest level in more than a year this week, as reduced anxiety over the public finances and hopes for further Bank of England interest rate cuts fuelled a recovery in gilts. Expectations that falling inflation will allow for deeper Bank of England rate cuts, as well as an easing of concerns over hefty public borrowing in the wake of Chancellor Rachel Reeves’ tax-raising November Budget, have helped UK gilts outperform a global bond rally in recent weeks.
Commodity markets
In the commodity markets, Brent crude futures traded around $64 per barrel on Friday and are set for a weekly rise, after protests flared up in Iran and US President Donald Trump signalled the potential for strikes on the nation. However, late on Thursday, President Trump said Tehran’s crackdown on the protesters was easing, allying worries over possible military action that could disrupt oil supplies.
The US energy Information Administration put out a report this week that American crude and gasoline inventories had risen by more than analysts had estimated, which dampened the market. Sources also told Reuters that Venezuela had begun reversing its production cuts and resumed exports.
Oil giant Shell released its 2026 Energy Security Scenarios on Thursday with a bullish case for energy demand and oil growth. The company estimated that primary energy demand by 2050 could be 25% higher than last year. Producer organisation OPEC said on Wednesday that oil supply and demand will remain balanced in 2026, with demand rising in 2027 at a similar pace to growth for this year.
Gold prices traded around $4,610 an ounce on Friday and are set for a weekly rise, after heightened geopolitical tensions earlier in the week. However, gold prices began to decline towards the end of the week, after the odds of intervention by the United States in Iran reduced.
Equity markets
US equity futures rose again on Friday after Wall Street posted broad gains in the previous session, driven by strength in banks and technology shares. In Thursday’s regular trading session, the Dow Jones Industrial Average gained 0.60%, the S&P 500 advanced 0.26%, whilst the Nasdaq Composite increased 0.25%. US inflation remained at 2.7% in December, suggesting that price growth is being contained, despite remaining above the Federal Reserve’s target.
The annual consumer price index figure was unchanged from November and in line with the expectations of economists polled by Bloomberg. Core inflation, which strips out volatile food and energy prices, rose 2.6%, below expectations of 2.7%. The headline figure was pushed higher by housing-related prices, which rose by 3.2%. The figures suggested that price rises in the world’s leading economy had eased, despite last year’s fears that President Trump’s aggressive implementation of tariffs could push them sharply higher.
The number of Americans filing new applications for unemployment benefits unexpectedly fell last week, but the drop was likely due to ongoing challenges adjusting the data for seasonal fluctuations around this time of the year. Initial claims for state unemployment benefits dropped by 9,000 to a seasonally adjusted 198,000 for the week ended 10th January, the Labor Department said on Thursday. Economists polled by Reuters had forecast 215,000 claims for the latest week. The government also reported that nonfarm payrolls increased by 50,000 jobs in December.
The US economy added 584,000 jobs in 2025, the fewest in five years, averaging about 49,000 positions per month. The unemployment rate fell to 4.4% from 4.5% in November, but long-term unemployment remains prevalent. Although economists expect the Federal Reserve will keep its benchmark overnight interest rate in the 3.50%-3.75% range at its January meeting, reductions in borrowing costs are anticipated this year to safeguard the labour market.
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