UK Stock Market Today (9 December 2025): FTSE 100 Edges Higher as Defence Stocks Offset BAT Slide

The UK stock market spent Tuesday moving in a narrow band but ultimately closed modestly higher, as defence stocks helped the FTSE 100 overcome weakness in tobacco and consumer names ahead of crucial interest rate decisions from the US Federal Reserve and the Bank of England.

Market snapshot: modest gains for FTSE 100 and FTSE 250

By early afternoon in London, the FTSE 100 was up around 0.1%, with the domestically focused FTSE 250 gaining about 0.2%, helped by strong defence shares and despite pressure on British American Tobacco (BAT). ^[1]

Later price data show the blue‑chip FTSE 100 finished the session at 9,667.35, up 0.23% on the day, after trading between 9,628.85 and 9,672.90. ^[2] That leaves the index less than 3% below its 52‑week high around 9,930 points. ^[3]

The mid‑cap FTSE 250 closed at 21,956.25, up roughly 0.16% from Monday’s 21,921.28, according to index data providers. ^[4]

Intraday, trading was subdued. RTT News reported the FTSE 100 was down just 0.09% around 9,653.95 late in the morning, underscoring how narrow the day’s range was as investors largely sat on their hands ahead of the Fed’s policy announcement. ^[5]

Zooming out, 2025 remains one of the strongest years for UK equities in recent memory. Analysis from The Motley Fool suggests FTSE 100 shares are up around 17% on average so far this year, making 2025 “one of the best years” for the index, with at least one miner up over 300% year‑to‑date. ^[6]

Defence rallies while tobacco and retailers lag

Defence stocks lift the index

The main positive driver on the day was defence.

BAE Systems gained around 2–3%.
Rolls‑Royce also ticked higher.

Both moved after reports that German lawmakers are poised to approve a record €52 billion defence procurement package, boosting sentiment toward European defence contractors. ^[7]

RTT News also highlighted Babcock International and Fresnillo among the notable gainers in the FTSE 100, alongside The Sage Group, which climbed more than 3%. ^[8]

British American Tobacco under pressure

The main drag on the blue‑chip index was British American Tobacco.

BAT shares fell about 2.8–2.9% after the group said it expects 2026 trading to land at the lower end of its mid‑term targets, reflecting intensifying regulatory and competitive pressures in the US vaping market. ^[9]

The stock’s high dividend yield has long attracted income investors, but today’s move shows markets are increasingly wary about long‑term growth in traditional tobacco and the cost of transitioning toward reduced‑risk products. IG and other analysts have previously pointed out that BAT is among the highest‑yielding FTSE 100 names, with yields around 7–8% in 2025. ^[10]

Mixed picture for UK consumer names

Fresh data reinforced the message that the UK consumer is still under pressure:

Barclays reported that card spending by UK consumers fell 1.1% year‑on‑year in November, the biggest decline since early 2021.
The British Retail Consortium said big‑box retail sales were up just 1.4% versus a year earlier, the slowest growth since May. ^[11]

Those numbers weighed on parts of the retail and discretionary complex. RTT News noted declines in JD Sports, Tesco, easyJet, IAG and Antofagasta, while some consumer staples and travel names drifted lower as investors questioned how resilient demand will be through 2026. ^[12]

Index reshuffle: British Land replaces WPP in FTSE 100

Although the actual index changes take effect later in December, traders are already positioning around the FTSE UK Index Series quarterly review, which often drives buying and selling flows.

In its December review, FTSE Russell confirmed that: ^[13]

British Land will join the FTSE 100, moving up from the FTSE 250.
Advertising giant WPP will be ejected from the FTSE 100 and relegated to the FTSE 250.

The review also reshuffles the FTSE 250 itself, with additions including GB Group, Pan African Resources, Princes Group, Shawbrook Group and WPP, and deletions such as British Land Co, European Opportunities Trust, Foresight Solar Fund, PayPoint and Pinewood Technologies. ^[14]

The decision caps a bruising year for WPP. The Guardian notes the group’s market value has fallen from about £24 billion in 2017 to around £3.1 billion, with the share price dropping by roughly two‑thirds in 2025 alone, as it struggled with client losses and the pivot to data‑driven advertising and AI. ^[15]

For investors, this index shuffle matters because passive funds and ETFs that track the FTSE 100 and FTSE 250 will have to adjust their holdings around the effective date (after the close on 19 December 2025), potentially amplifying short‑term moves in both British Land and WPP. ^[16]

Corporate news: Unilever consolidation, buybacks and small‑cap raises

Beyond the headline movers, several corporate developments coloured trading on the London Stock Exchange today:

Unilever confirmed an 8‑for‑9 share consolidation effective from the market open on 9 December, following the completion of its spin‑off of the Magnum and broader ice‑cream business. ^[17] The consolidation is designed to keep the share price in a familiar range and reflects a leaner, non‑ice‑cream business profile.
Man Group rose around 3.5% after JPMorgan upgraded the hedge‑fund manager to “overweight”, citing an improved earnings outlook. ^[18]
Online greetings retailer Moonpig gained roughly 3.3% on solid interim sales and profit growth, suggesting online discretionary spending remains resilient even as broader retail data soften. ^[19]
Oxford Instruments continued its buyback programme, with an RNS confirming ongoing transactions in its own shares, a supportive backdrop for the stock. ^[20]
On London’s smaller growth markets, food tech firm MicroSalt PLC announced a £1.5 million subscription share raise to fund growth, highlighting ongoing investor appetite for niche health‑focused businesses despite a higher‑rate environment. ^[21]

These company‑specific moves add to a picture of a market where stock‑picking and corporate news flow are increasingly important drivers, even as the headline indices trade in tight ranges.

Macro backdrop: Budget, inflation and looming rate cuts

Budget 2025 and the inflation outlook

The macro tone for UK assets is being shaped by Rachel Reeves’ Autumn Budget, delivered on 26 November, and subsequent analysis by the Office for Budget Responsibility (OBR), the Office for National Statistics (ONS) and the Bank of England.

Key points:

The Budget package is estimated to cut CPI inflation by about 0.4 percentage points in 2026–27, mainly via measures that reduce household energy and transport costs (including changes to levies on energy bills, fuel duty policy and a freeze in regulated rail fares). ^[22]
The document notes that CPI inflation, which peaked above 11% in 2022, has now dropped back to 3.6% in October 2025, down from 3.8% in September. ^[23]
GDP growth in 2025 has reached about 1.0% so far, with services driving the expansion, but productivity remains a structural weak spot. ^[24]

An accompanying House of Commons Library briefing summarises that the OBR expects UK inflation to average around 3.6% in Q4 2025, then fall towards the 2.1% target area by Q4 2026, assuming current policy settings. ^[25]

In evidence to MPs today, Bank of England Deputy Governor Clare Lombardelli told the Treasury Committee that Bank staff estimate the Budget will knock 0.4–0.5 percentage points off the annual inflation rate from around Q2 2026, mainly thanks to energy‑ and transport‑related measures. ^[26] She emphasised that the impact on growth is likely to be modest, with slightly looser fiscal policy only marginally boosting GDP in the near term. ^[27]

Bank of England: December cut in focus

The Bank Rate currently stands at 4.0%, after the Monetary Policy Committee (MPC) held rates in early November but signalled it was preparing for easing. ^[28] The Bank’s own website confirms that the next interest‑rate decision will be announced on 18 December 2025. ^[29]

Market and economist expectations are strongly biased toward a cut:

A Reuters poll of economists taken in mid‑November found nearly 80% expect a 25‑basis‑point cut to 3.75% on 18 December, with most of the remainder predicting no move. A similar share expect another cut to 3.5% in Q1 2026. ^[30]
The OECD forecast last week that the BoE will stop easing once rates reach about 3.5% by mid‑2026, citing still‑elevated price pressures. ^[31]
Goldman Sachs Research is more dovish, projecting a December cut followed by three further cuts in 2026, taking Bank Rate down to roughly 3% by the summer of 2026, as inflation drifts toward target and growth remains subdued. ^[32]

From an equity perspective, lower rates typically support:

Rate‑sensitive domestics – such as housebuilders, banks (via lower impairments and more stable funding) and consumer cyclicals.
High‑dividend sectors – whose yields become more attractive as bond yields fall.

However, with the FTSE 100 already up strongly in 2025 and valuations no longer at “fire‑sale” levels, the scope for an easy rerating may be narrowing.

Financial stability: BoE says banks can weather a storm

Adding to the macro mix, the Bank of England published its December 2025 Financial Stability Report last week. The report’s stress‑test results indicate that the UK banking system would remain able to support the real economy even under a severe downturn scenario, albeit with pressures on profitability and capital buffers. ^[33]

The Financial Policy Committee notes that overall risks to financial stability have increased in 2025 — reflecting higher debt costs, stretched asset valuations in some markets and geopolitical tensions — but judges that the core banking system is resilient. ^[34]

For equity investors, this reduces the tail‑risk of another 2008‑style financial crisis, even as it leaves “slow grind” risks like weak productivity and sluggish real wage growth very much in play.

How strategists see the UK market now: discounts, dividends and dispersion

Even after this year’s rally, UK stocks still trade at a noticeable valuation discount to US equities and many global peers.

Recent analyses suggest:

The FTSE 100 trades around 12–13 times forward earnings, compared with roughly 22x for the S&P 500 and around 19–20x for the MSCI World. ^[35]
UK valuations remain below long‑run global medians, even after the 2025 recovery, according to several cross‑market studies. ^[36]

On the income side:

Data from DividendData put the average FTSE 100 dividend yield in 2025 at about 3.4%, with the range for the year between roughly 3.1% and 4.0%. ^[37]
Earlier this year AJ Bell and Trustnet estimated a forward yield of about 3.5% for 2025 based on consensus dividend forecasts. ^[38]
Individual large‑cap stocks continue to offer yields well above that level, with several names above 8%, albeit often coupled with elevated business or regulatory risk. ^[39]

That combination of moderate valuations, solid dividend income and still‑challenging domestic growth is one reason international strategists often describe the UK market as a “value and income” play within global portfolios. ^[40]

At the same time, performance dispersion within the index is huge: while the average stock is up about 17% this year, some cyclicals and miners have more than tripled, and others — like WPP — have lost the majority of their value. ^[41] That makes stock selection and sector tilts critical for active managers.

What to watch next for the UK stock market

Looking ahead from today’s close, several catalysts will likely drive UK equities over the coming days and weeks:

Federal Reserve decision (this week)
- Markets widely expect a 25‑basis‑point cut from the Fed. The tone of Chair Powell’s press conference on growth, inflation and future cuts could move global risk assets, including the FTSE 100, which has a heavy weighting in global cyclicals, energy and financials. ^[42]
Bank of England decision (18 December)
- A cut to 3.75% is widely anticipated. A more cautious message on inflation could disappoint rate‑sensitive stocks, while a clearly dovish signal might support domestically focused banks, housebuilders and retailers. ^[43]
Implementation of the FTSE UK index review (19/22 December)
- The transition of British Land into the FTSE 100 and WPP into the FTSE 250 could generate sizeable closing‑auction flows on 19 December and early‑session volatility on 22 December, particularly in passive and quant‑driven strategies. ^[44]
Incoming data on inflation, wages and consumer spending
- With October CPI already down to 3.6%, investors will scrutinise upcoming price and wage data to judge whether the disinflation trend is durable and whether Budget measures are starting to feed through. ^[45]
Earnings updates from UK cyclicals and defensives
- Today’s price moves in BAT, WPP, BAE Systems and others underline how sensitive valuations are to company‑specific news – particularly around strategy, regulation and capital allocation. ^[46]

Takeaway for investors

The headline story today is one of small index gains but meaningful under‑the‑surface rotation:

Defence and selected industrials are in favour on the back of higher global defence spending.
Tobacco and some consumer names are under pressure as investors reassess earnings resilience.
The macro backdrop is cautiously improving on inflation, but growth and productivity remain concerns.
Valuations still look reasonable versus global peers, especially when factoring in dividends, but the easy money from the UK’s deep discount may already be behind us.

For long‑term investors, the UK market continues to offer:

Income – via above‑average dividend yields.
Value – with forward earnings multiples below those of the US market.
Dispersion – where careful stock selection and sector allocation can significantly influence returns.

As always, this analysis is for information and news purposes only, not personal investment advice. Anyone considering investing in UK shares or funds should assess their own risk tolerance and, if needed, seek regulated financial advice.