London, 18 December 2025 — The United Kingdom stock market is starting the day on a cautious footing, with the FTSE 100 expected to edge slightly lower at the open as investors brace for a high-impact mix of Bank of England policy, fresh US inflation data, and a global risk mood unsettled by renewed tech-sector “AI spending” jitters. [1]
While the mood is wary, London equities remain supported by two powerful domestic tailwinds: a sharp downside surprise in UK inflation that has pushed rate-cut expectations close to “fully priced”, and a heavyweight energy sector that may benefit from rebounding oil prices amid geopolitics. [2]
UK Market Snapshot: FTSE 100 Futures Dip, Focus Turns to Noon BoE Decision
Early indicators point to a muted start for blue chips. Reuters’ early “factors to watch” flagged FTSE 100 futures down around 0.1%, and IG pricing cited in a London market early call suggested the index could open about 2.8 points lower at 9,771.52. [3]
That comes after a strong prior session: the FTSE 100 closed up 0.9% at 9,774.32 on Wednesday (17 December), a rally attributed largely to rate-sensitive homebuilders and banks after the inflation print surprised sharply to the downside. [4]
The Big Driver: Bank of England Expected to Cut Rates — But the Message Matters More
The centre of gravity for UK assets today is the Bank of England’s decision due at 12:00 GMT. Markets and most mainstream previews expect a quarter-point cut to 3.75% from 4.00%, which would be the BoE’s fourth reduction of 2025 and take borrowing costs to their lowest level in nearly three years. [5]
Why the BoE is in play: inflation just tumbled to 3.2%
The policy call has been heavily shaped by Wednesday’s inflation data: UK CPI slowed to 3.2% in November from 3.6% in October, undershooting consensus expectations and the BoE’s own prior projection, while measures like core and services inflation also came in softer than forecast. [6]
The result: markets moved to price the rate cut as close to certain, with sterling weakening sharply immediately after the data before stabilising into today’s decision window. [7]
What traders will watch at noon: vote split and guidance
Even if the cut itself is widely expected, how divided the Monetary Policy Committee is could drive the next leg in UK markets. Reuters previews have emphasised a still-fractured committee, with expectations of another close vote after a narrow hold at the prior meeting. [8]
The bigger question is whether the BoE frames today as a one-off “risk-managed” adjustment or signals the start of a more predictable easing run. Reuters analysis has highlighted a growing tension: as inflation drops, the inflation-adjusted (real) policy rate can tighten even if the nominal rate doesn’t move, raising the risk the BoE is “behind the curve” unless it cuts faster than markets currently expect. [9]
In other words, investors may treat today’s decision as less about “cut or no cut” and more about whether the BoE validates expectations for 2026 — or pushes back.
Sterling and Gilts: Inflation Shock Reshapes the Cross-Asset Picture
Pound: from post-CPI slump to pre-BoE steadiness
Sterling has been choppy around the BoE setup. Reuters reporting showed the pound “nursed losses” after the inflation surprise, trading around $1.337 in the run-up to today’s central bank decision window after falling as low as the low-$1.33 area. [10]
For equities, the currency matters in two ways:
- A weaker pound can inflate overseas earnings for global FTSE earners (a long-standing FTSE 100 support).
- It can also signal faster domestic easing expectations, often lifting rate-sensitive UK sectors.
Gilts: yields fall as the rate-cut path gets repriced
The inflation surprise didn’t just move FX; it ripped through the gilt curve. Reuters reporting highlighted a sharp drop across maturities, including two-year gilt yields around 3.697% and 10-year yields around 4.448% during Wednesday’s repricing, with investors increasing the amount of easing priced through 2026. [11]
This matters for the stock market because falling yields typically support:
- Housebuilders (mortgage affordability expectations)
- Utilities/real estate (bond-proxy characteristics)
- Mid-caps tied more closely to domestic demand (FTSE 250 sensitivity)
Global Backdrop: Tech Jitters, Central Bank Divergence, and Oil Rebound
London is trading into a global backdrop that’s complicated rather than cleanly “risk-on.”
Tech and “AI spending” anxiety dents sentiment
Reuters’ global markets wrap described Asian equities weaker and pointed to renewed anxiety around the cost and payback of aggressive AI infrastructure buildouts. The report referenced sharp moves in major US tech names, including declines in AI bellwethers and a notable drop in Oracle tied to a project financing development. [12]
Even though the FTSE 100 is less tech-heavy than the S&P 500 or Nasdaq, global risk sentiment still matters — particularly into big macro catalysts like the BoE and US CPI.
Oil prices rebound on geopolitics — supportive for FTSE energy heavyweights
Oil is the other major global input for London today. Reuters reported crude extending gains after geopolitical developments affecting Venezuela-linked flows and potential Russia-related sanctions risk, lifting Brent back above $60 a barrel in early trade. [13]
For the UK market, a firmer oil tape typically supports heavyweight index constituents (and can partially offset a softer tone elsewhere).
UK Corporate News Today: BP CEO Surprise and Currys Earnings Take the Spotlight
BP: new CEO, new strategy questions — and renewed M&A speculation
One of the most market-moving UK corporate stories today is BP’s abrupt leadership change. The company has appointed Meg O’Neill (Woodside Energy CEO) as its next chief executive, with Carol Howle serving as interim CEO until O’Neill joins in April 2026. [14]
Reuters analysis framed the appointment as a major strategic signal for a “bruised” BP, highlighting three broad paths: build, buy, or be bought — in other words, anything from accelerating upstream investment, to pursuing acquisitions, to becoming a takeover target itself as industry consolidation logic strengthens. [15]
BP’s weight in the FTSE 100 means any large share reaction can ripple into index performance, particularly on a day when macro positioning is already sensitive.
Currys: profit jump in half-year results
Another UK name drawing attention is Currys, after reporting a sharp improvement in profitability. The retailer posted a 144% rise in adjusted pre-tax profit to £22 million for the first half, alongside 8% revenue growth, according to reporting referenced in today’s market coverage. [16]
In a rate-sensitive tape, results like these can attract investors hunting for domestic recovery exposure — especially if the BoE’s messaging is perceived as supportive for consumer demand into 2026.
Ex-dividend watch: mechanical index drags
Investors also have to navigate technical factors that can nudge the FTSE around the open, including ex-dividend trading for names such as Halma and United Utilities, which can mechanically weigh index levels even if broader sentiment is unchanged. [17]
Regulation Watch: UK Plans Benchmark Rule Overhaul
Beyond the day’s immediate price action, the City is also digesting a significant policy proposal: the UK government plans to overhaul financial benchmark regulation, aiming to reduce compliance burdens by focusing supervision on benchmarks that pose systemic risk. Reuters reporting said the changes could sharply reduce the number of benchmark administrators within scope and that the government is seeking feedback into March 2026. [18]
For market participants, benchmarks are plumbing — but crucial plumbing. Rules around them can affect everything from index-linked products to derivatives referencing key benchmarks.
Forecasts and Market Outlook: What Today’s Events Could Mean for UK Stocks Into 2026
The near-term outlook hinges on the BoE’s “path,” not just the cut
The UK equity market’s immediate reaction function looks straightforward:
- Dovish cut (or dovish-leaning minutes) → supportive for homebuilders, domestic cyclicals, and potentially the FTSE 250.
- Hawkish cut (or strong pushback on 2026 easing) → potentially supportive for sterling, but a headwind for rate-sensitive equities.
Reuters analysis has stressed that even after a cut, the real policy stance can remain restrictive if inflation keeps dropping — which is why investors will scrutinise whether the BoE signals comfort with the limited number of additional cuts currently priced in. [19]
Borrowing-cost forecasts: investment banks see gilt yields drifting lower in 2026
On the rates side, forecasts published today in the Financial Times indicate major banks expect UK borrowing costs to ease further through 2026, with a widely cited projection that the 10-year gilt yield could fall to about 4.32% by end-2026. [20]
If that path plays out, it would generally be a constructive backdrop for UK equities — though the benefit won’t be uniform. Lower yields can support valuations, but the market will still weigh growth, earnings resilience, and global risk appetite.
The final “today” catalyst: US inflation data
Finally, London’s session is also set against US November CPI due later today — a key global input for risk appetite and bond yields. Reuters reporting noted the unusual complication that October US inflation data was disrupted by a government shutdown, amplifying uncertainty around the trend signal investors will take from today’s release. [21]
What to Watch for the Rest of the Trading Day
For anyone tracking the UK stock market today, these are the key pressure points likely to decide direction:
- 12:00 GMT — Bank of England decision and minutes (vote split, guidance tone). [22]
- Sterling’s reaction (FTSE 100 global earners vs domestic cyclicals). [23]
- Gilt yields after the decision (rate-sensitive sectors and the FTSE 250). [24]
- BP share move on CEO/strategy implications (index impact). [25]
- US CPI later today (global rates and risk mood into the close). [26]
As London heads toward year-end, the market is balancing optimism over easing inflation with a global backdrop that remains sensitive to tech sentiment and geopolitics. Today’s BoE decision is the moment that can tip that balance — not just for the next few hours, but potentially for how investors price UK risk into 2026. [27]
References
1. www.tradingview.com, 2. www.reuters.com, 3. www.tradingview.com, 4. fintel.io, 5. www.reuters.com, 6. www.reuters.com, 7. www.reuters.com, 8. www.reuters.com, 9. www.reuters.com, 10. www.reuters.com, 11. www.tradingview.com, 12. www.reuters.com, 13. www.reuters.com, 14. www.tradingview.com, 15. www.reuters.com, 16. www.theguardian.com, 17. www.tradingview.com, 18. www.reuters.com, 19. www.reuters.com, 20. www.ft.com, 21. www.reuters.com, 22. www.bankofengland.co.uk, 23. www.reuters.com, 24. www.tradingview.com, 25. www.reuters.com, 26. www.reuters.com, 27. www.reuters.com
