UK markets advanced this week, with the FTSE 100 Index rising by 1.5% to trade at 9,833 points at the time of writing.
UK inflation fell more than expected to an eight-month low of 3.2% in November, figures from the Office for National Statistics (ONS) showed, below the forecasts of 3.5% from analysts in a Reuters poll. It also marked a slowdown from October’s 3.6%. November’s inflation reading was pulled down by weaker food, drink and clothing prices, the ONS said. Services inflation, a measure closely tracked by Bank of England rate setters, eased to 4.4% in November, from 4.5% in October. Core inflation, which excludes energy and food, was 3.2% down from 3.4% in October and below economists’ expectations.
The UK unemployment rate rose to 5.1% and wage growth slowed in the three months to October, as employers held off hiring ahead of the government’s second tax-raising Budget. The figure, which was released from the ONS on Tuesday, was up from 5% in the three months to September, in line with analysts’ expectations and the highest since January 2021.
Separate figures from tax records showed that payroll employment fell by 149,000, or 0.5%, in the year to October, the ONS said. Provisional figures pointed to a further fall of 38,000, or 0.1%, between October and November, although these are likely to be revised. The weakness in the jobs market reflects the uncertainty that weighed on the economy in the run-up to the November 26th Budget, as businesses delayed decisions while waiting for clarity on tax policy.
In response to these figures, the Bank of England cut interest rates by 0.25% to 3.75% on Thursday, while cautioning that future decisions on reductions were likely to be a “closer call”. The central bank’s Monetary Policy Committee voted five to four in favour of a sixth rate cut since the summer of 2024, as it forecast that inflation is likely to fall close to its 2% target in the second quarter of 2026.
The rate cut was seen by investors as a near certainty but some had expected a more dovish signal from the Bank of England after the inflation and jobs data. Forward-looking wage indicators remain “elevated, with Bank of England agents around the country predicting pay settlements of 3.5% in 2026, the bank said. However, the central bank said policies announced in last month’s Budget to contain increases in the cost of living are set to help reduce headline consumer price inflation next year by around 0.5%.
Elsewhere, the UK S&P Composite Purchasing Managers Index rose to 52.1 in December 2025 from November’s 51.2 reading and surpassing market forecasts of 51.6. The data showed the UK’s private sector has expanded for the eighth consecutive month, with growth accelerating from the previous month.
Commodity markets
In the commodity markets, Brent crude futures traded around $59.86 per barrel on Friday and are set for a weekly fall, as investors assessed the likelihood of further US sanctions against Russia and the supply risks posed by a blockade of Venezuelan oil tankers.
Bloomberg reported on Wednesday that the US is preparing another round of sanctions on Russia’s energy sector in the event that Moscow does not agree to a peace deal with Ukraine. Further measures targeting Russian oil could pose an even bigger supply risk to the market than Trump’s announcement on Tuesday that the US would blockade tankers under sanctions entering and leaving Venezuela.
The Venezuela blockade could affect 600,000 barrels per day of Venezuelan oil exports, mostly to China, but 160,000 barrels per day of exports to the US would likely continue. Chevron vessels were continuing to depart for the US under a previous authorisation from the US government. It is not yet clear how a US blockade would be enforced.
The US Coast Guard took the unprecedented step of seizing a Venezuelan oil tanker last week, and sources have said the US is preparing for more such interdictions. Venezuelan crude makes up around 1% of global supplies.
Gold prices traded around $4,335 an ounce on Friday trading near record highs, supported by dovish Federal Reserve signals and elevated geopolitical risks.
Equity markets
US equity futures were mixed on Friday following positive inflation data from Thursday and concerns around AI were abated by positive Micron results. In Thursday’s regular trading session, the Dow Jones Industrial Average rose 0.14%, the S&P 500 gained 0.79%, whilst the Nasdaq Composite advanced 1.51%.
The US unemployment rate rose to 4.6% in November, the highest level in more than four years, in a further sign of weakness in the labour market. The US economy added 64,000 jobs in November, but shed 105,000 in October, bolstering the case for the Federal Reserve to cut interest rates further in the new year.
Despite figures for new posts in November beating expectations of 50,000 among economists polled by Bloomberg, the loss of jobs in October was far greater, dragged down by a large drop-off of 162,000 in federal government employment. The unemployment figure was the highest since September 2021 and compared with a rate of 4.4% in September 2025.
US inflation unexpectedly fell to 2.7% in November, annual consumer price index figures from the Bureau of Labor Statistics showed, well below expectations of a 3.1% increase among economists polled by Bloomberg, and September’s rise of 3%. Core inflation, which strips out volatile food and energy prices, rose 2.6%, below expectations of 3%.
However, some analysts have said the figures were distorted by federal statistics agencies’ inability to collect data during the recent government shutdown. The inflation and unemployment reports provide a crucial glimpse at the US’s economic health after the record-long shutdown halted data collection and caused many official releases to be postponed.
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