21st November 2025

UK markets pulled back further this week, with the FTSE 100 Index falling by 2.4% to trade at 9,475 points at the time of writing.

UK inflation fell to 3.6% in October, strengthening the case for the Bank of England to cut interest rates next month to boost a sluggish economy set to be hit by higher taxes in next week’s Budget. The figure from the Office for National Statistics was in line with the expectation of economists polled by Reuters and down from September’s 3.8% reading.

October’s decline was driven by a smaller increase in gas and electricity prices compared with a year earlier, along with a fall in hotel prices, according to the Office for National Statistics. The Bank of England’s Monetary Policy Committee held rates at 4% this month in a close vote but signalled that a cut could come as soon as December if price pressures continue to ease.

Services inflation, which is closely watched by Bank of England rate-setters as a gauge of underlying price pressures, fell to 4.5% in October – below economists’ forecasts of 4.6% and down from 4.7% in September. Core inflation, excluding energy and food, eased to 3.4% in October from 3.5% in September. In a notable exception to the broader easing of price pressures, food and drink inflation rose to 4.9%, up from 4.5% in September.

A report on Friday from the Office for National Statistics showed that public sector borrowing reached £17.4 billion last month, above the £15 billion expected in a Reuters poll of analysts and highlighting the fragile state of the UK economy.

So far this fiscal year, the Treasury has borrowed £116.8 billion – nearly £10 billion more than the Office for Budget Responsibility’s latest forecast. A separate ONS release showed that British retail sales fell by 1.1% in October, a much sharper drop than expected and one that ended three months of solid growth, as consumers cut back on clothing and food purchases. Data from research firm GfK also revealed a decline in consumer confidence in October.

Elsewhere, the Bank of England has raised the amount of money to be covered by the UK’s deposit guarantee scheme to £120,000, increasing it by more than initially planned to take account of inflation. The central bank said on Tuesday that the treasury had approved its plan to raise the level of protection for UK depositors in the banking system from its current level of £85,000 per person from the start of December.

The change is likely to mean that banks and other authorised financial services companies have to pay a higher contribution to the Financial Services Compensation Scheme, which refunds customers of failed companies in the sector.

Commodity markets

In the commodity markets, Brent crude futures traded around $62 per barrel on Friday and are set to end the week lower, as the United States pushed for a Russia-Ukraine peace deal that could increase the global oil market supply, while sanctions on Russian oil producers Rosneft and Lukoil took effect on Friday.

Ukraine’s president Volodymyr Zelenskiy has agreed to work on a US and Russia drafted peace plan. The blueprint is expected to be discussed further when Zelenskiy speaks with US president Donald Trump in the coming days. The proposals reportedly include territorial concessions by Ukraine and the lifting of sanctions, which could open the door to higher Russian oil exports and increase oversupply concerns.

However, European diplomats remain sceptical that a deal will materialise. Meanwhile, the US sanctions on Rosneft and Lukoil which took on Friday leave as many as 48 million barrels of oil stranded at sea. Indian refiners, long reliant on discounted Russian supplies, are now seeking alternative sources. Lukoil has until 13th December to sell its huge international portfolio.

Gold prices traded around $4,040 an ounce on Friday and are set for a weekly fall, as a stronger than expected US jobs report reinforced expectations that the Federal Reserve will refrain from cutting interest rates at its December meeting.

Equity markets

US equity futures were mixed on Friday after a dramatic reversal in the previous session, as concerns of an artificial intelligence bubble persisted, while solid jobs data reinforced expectations that the Federal Reserve will hold off on cutting interest rates in December. In Thursday’s regular trading session, the Dow Jones Industrial Average fell 0.84%, the S&P 500 dropped 1.56%, whilst the Nasdaq Composite declined 2.15%.

The US economy added 119,000 jobs in September, but unemployment reached its highest level in four years, figures that will complicate the Federal Reserve’s decision on whether to cut interest rates next month. The job numbers were far greater than expectations of 50,000 new posts among economists polled by Bloomberg. However, they were offset by downward revisions of 33,000 to the previous two months’ tallies. The August figure was revised to a loss of 4,000 jobs, marking just the second time since the Covid-19 pandemic that the US economy has shed positions.

Meanwhile, the unemployment rate rose from 4.3% in August to 4.4% in September, the highest level since 2021. The data release is the first indicator of the health of the US economy from the Bureau of Labor Statistics since a record-length shutdown of the federal government halted publication of official data. In a further sign of how the jobs market has moderated in recent months, downward revisions to employment figures leave combined hiring from May to August at just 74,000.

Fund management giant Vanguard has warned that the Federal Reserve is likely to cut borrowing costs far less than Wall Street expects, as the surge in artificial intelligence spending continues to support strong economic growth. The firm anticipates only one or two rate cuts, in sharp contrast to market expectations of three to four reductions by the end of 2026.

Vanguard’s more hawkish outlook comes as debate intensifies within the Federal Reserve over whether to cut rates next month, with policymakers weighing signs of labour-market softness against persistently elevated inflation and only moderate growth.