London’s stock market spent Thursday morning in a holding pattern, with the FTSE 100 hovering just below record territory as investors digested the US Federal Reserve’s latest rate cut, a softening UK housing market and growing expectations of a Bank of England (BoE) move next week.
As of late morning on Thursday 11 December, the FTSE 100 was trading a touch higher around 9,662, up about 0.1% on the day and almost unchanged in percentage terms after an early dip. [1] The blue‑chip benchmark remains only a few percent below the record close near the 10,000 mark set in mid‑November. [2]
The broader FTSE 250 mid‑cap index was slightly softer after the open, while small caps on the AIM All‑Share eked out modest gains. [3] Across Europe, indices were mixed, with Germany’s DAX near flat and France’s CAC 40 edging higher, underscoring a cautious tone after a powerful Wall Street rally faded on renewed anxiety over tech valuations. [4]
Market snapshot: FTSE 100 flatlines despite global cross‑currents
London’s main index opened marginally lower at 9,642.99, slipping around 0.1% in early trade before recovering. [5] By 08:18 GMT, the FTSE 100 was down just 0.02%, while sterling eased slightly against the dollar to sit just above $1.33. [6]
By mid‑morning, demand for heavyweight names such as AstraZeneca and J Sainsbury was enough to push the index into positive territory. The FTSE 100 was recently up around 6–7 points at roughly 9,661.9, a gain of about 0.07% on the session. [7]
Key moving parts in today’s session include:
- FTSE 100: Slightly higher, hovering around 9,660–9,665.
- FTSE 250: Fractionally lower after the open, with some support from Drax following a bullish earnings update. [8]
- AIM All‑Share: Up around 0.3%, signalling tentative risk appetite further down the market cap spectrum. [9]
- Europe: DAX effectively flat and CAC 40 modestly positive, reflecting a mixed continental response to the Fed’s decision and tech‑sector nerves. [10]
In fixed income, UK government bond yields edged lower, with the 10‑year gilt around 4.49–4.50% and two‑year yields near 3.77%, extending a gentle rally as markets continue to price an approaching BoE easing cycle. [11]
Global backdrop: a “hawkish cut” from the Fed and AI jitters
The immediate backdrop for today’s modest moves is last night’s US Federal Reserve meeting. The Fed delivered its third consecutive 25‑basis‑point cut, lowering the federal funds target range to 3.5–3.75%, but signalled only one additional cut is likely in 2026. [12]
Wall Street initially welcomed the decision:
- Dow Jones: Closed about 1.1% higher.
- S&P 500: Gained roughly 0.7%.
- Nasdaq: Ended modestly up, but futures point lower today. [13]
That optimism quickly cooled after Oracle posted quarterly revenues slightly below expectations and hiked its capital expenditure guidance, triggering an 11% after‑hours slide in the stock and reigniting concerns about stretched valuations in AI‑linked tech names. [14]
Those worries spilled into global markets:
- US futures: Point to a weaker open as traders re‑price parts of the AI trade.
- Asia: Japan’s Nikkei 225 fell around 0.9%, weighed down by SoftBank. [15]
- Europe: Tech‑sensitive sectors lag, contributing to the FTSE 100’s muted tone despite the dovish lean from the Fed.
A separate layer of caution came from Switzerland, where the Swiss National Bank left rates unchanged, underscoring that not all central banks are ready to follow the Fed’s path. [16]
Against this mixed global backdrop, analysts at Kalkine note that the United Kingdom’s FTSE complex opened with “restrained sentiment”, with domestic benchmarks preferring consolidation over chasing US gains. [17]
Domestic headwind: housing market softens after the Budget
On the home front, fresh data from the Royal Institution of Chartered Surveyors (RICS) injected a more downbeat note into the UK macro picture.
The latest RICS UK Residential Market Survey for November shows:
- New buyer enquiries fell by a net 32%, worsening from a 24% decline in October and marking the weakest reading since late 2023. [18]
- Sales agreed dropped by 24%, little changed from October’s 23% fall.
- House price balance remained negative, at ‑16% versus ‑19% in October, with the biggest pressure in traditionally expensive regions such as London, the South East and East Anglia. [19]
- Near‑term sales expectations deteriorated, with respondents now expecting a 6% decline over three months, versus a 3% fall previously. [20]
The rental side of the market also weakened, with tenant demand recording a net decline of 22% in November, compared to a 4% fall in October. Landlord instructions fell by 39%, the weakest reading since April 2020. [21]
Analysts at RBC Capital Markets link the slowdown partly to uncertainty surrounding the government’s recent Budget and the passage of the Renters Reform Act, which has complicated the outlook for buy‑to‑let investors and high‑value homeowners subject to new tax rules. [22]
Yet the survey was not entirely bleak:
- The 12‑month price outlook improved markedly, with a net 24% of respondents expecting house prices to rise, the strongest reading since June. [23]
- Estate agents anticipate rents to increase by about 2.5% over the next year, a shade below recent averages. [24]
For equity markets, the combination of near‑term housing weakness and slightly better medium‑term expectations leaves housebuilders, real‑estate investment trusts and related financials trading in a tug‑of‑war between cyclical caution and valuation support.
Central bank focus: BoE cut seen as “near‑certain”
Attention in the City is now firmly turning to the Bank of England’s policy meeting next week. The Fed’s move has intensified speculation that the BoE will finally begin its own easing cycle after a long pause.
According to a BoE preview from Bank of America, the central bank is expected to:
- Cut Bank Rate by 25 basis points to 3.75% in December.
- Deliver the cut via a razor‑thin 5–4 split vote, with four Monetary Policy Committee members likely preferring to hold. [25]
- Emphasise a gradual, data‑dependent approach, potentially pushing back against expectations of another cut as soon as February.
BofA’s house view is for quarterly cuts in December, March and June, bringing Bank Rate down to 3.25% by mid‑2026, though an alternative path of December, April and July is also considered. [26]
Separately, Morgan Stanley forecasts that the UK economy will grow by just 0.9% in 2026, with the unemployment rate rising to about 5.3%. The bank expects this “lacklustre growth” to force a more extended easing cycle, with rate cuts in December, February, April and June. [27]
Markets have already moved ahead of policymakers:
- Sonia futures and gilt yields suggest that a December cut is priced in with near‑certainty.
- Two‑year gilt yields — the most sensitive to the BoE path — are down around 4–5 basis points today, continuing a downward drift that began when traders started to pencil in earlier and deeper easing. [28]
For the FTSE 100, lower rate expectations have mixed implications: they tend to support highly leveraged or yield‑oriented stocks (such as utilities and REITs) but can compress margins for banks if the curve flattens too aggressively.
Stock‑level movers: AstraZeneca, Sainsbury, Entain, Drax and more
Although the overall index movement is small, there has been meaningful rotation beneath the surface.
Blue‑chip winners
- AstraZeneca: The pharmaceutical giant helped keep the FTSE in positive territory, adding about 70p to trade around 13,584p earlier in the session and then extending gains, making it one of the biggest positive contributors to the index. [29]
- J Sainsbury: Shares in the supermarket group gained around 3.4p to 320.4p after an upbeat broker note from Citigroup, which reiterated a positive stance and set a target price of 349p. [30] This plays into a broader narrative of investors favouring defensive, cash‑generative retailers as consumers adapt to higher living costs.
- Ashtead Group & ConvaTec: Among the other notable risers were equipment rental specialist Ashtead and medical products firm ConvaTec, both up more than 2% in early trading, according to intraday commentary, as investors continued to favour companies with clear earnings visibility. [31]
- MICC: A stock identified by AskTraders as one of the day’s stronger performers within the FTSE 100, reflecting selective buying in names seen as oversold following recent volatility. [32]
Under pressure
- Entain: Shares in the gambling group fell more than 2% after long‑serving Chief Financial Officer Rob Wood announced he would step down in 2026, with Michael Snape lined up as his successor. [33] While the orderly transition provides continuity, investors often discount leadership changes in complex, highly regulated sectors such as betting and gaming.
- Associated British Foods (ABF): The Primark owner topped the FTSE 100 fallers board earlier in the morning after its shares traded ex‑dividend, dropping about 2%. [34]
- Lloyds Banking Group and Marks & Spencer: Both names drifted lower, echoing a broader sense of fatigue in domestically focused financial and retail stocks as housing and consumer indicators soften. [35]
Mid‑cap and sector stories: Drax, Fitch, FirstGroup, Workspace & Heathrow
The FTSE 250 and wider market also produced several notable corporate updates:
- Drax Group: The power‑generation and biomass specialist climbed about 2% after unveiling plans to develop a 100MW data centre at its Yorkshire site and signalling that 2025 earnings are likely to land at the top end of consensus estimates. [36] The move highlights how infrastructure‑rich utilities are increasingly pivoting towards digital infrastructure to harness growing demand for data‑hungry AI and cloud workloads.
- Supermarket Income REIT (SUPR): Rating agency Fitch reaffirmed the FTSE 250 REIT’s long‑term Issuer Default Rating at ‘BBB+’ with a stable outlook, underlining the perceived resilience of its £1.6 billion portfolio of grocery‑anchored assets across the UK and Europe. [37]
- FirstGroup: The transport operator agreed to acquire RATP’s UK sightseeing bus operations, including 63 buses, two depots and around 190 staff, for roughly £17 million. [38] The deal expands FirstGroup’s footprint in London and Bath and adds a tourism‑exposed earnings stream ahead of what the travel sector hopes will be a strong 2026.
- Workspace Group: The flexible‑office landlord announced the sale of two “low‑conviction” properties for £11.8 million, broadly in line with their September valuation and implying a net initial yield of 5.7%. [39]The disposals are being read as a tidy bit of portfolio housekeeping amid ongoing debate about London office demand.
- PZ Cussons: The consumer‑goods company scrapped a previously announced plan to sell its African business, opting instead for an internal overhaul after offers failed to reflect management’s view of the unit’s long‑term value. [40]
Meanwhile, outside the quoted sphere but relevant for travel and leisure stocks, Heathrow said it is preparing for its busiest December on record, expecting passenger numbers to surpass the 7.08 million seen last year and forecasting a new Christmas Day high. [41] That backdrop is supportive for airlines and airport‑linked names, even as markets remain wary of the global growth outlook.
Seasonality and the “Santa rally”: why December matters for the FTSE 100
Beyond daily noise, a fresh piece of seasonal analysis is grabbing attention. Research from IG, highlighted by The Armchair Trader, suggests the UK’s blue‑chip index has historically enjoyed one of the world’s strongest “Santa rallies”. [42]
Looking at the last 25 years:
- The FTSE 100 has delivered an average December price return of 1.84%, compared with just 0.94% for the S&P 500.
- Incredibly, December has accounted for about 92% of the FTSE 100’s total annual price gains over that period (excluding dividends).
- By contrast, December represents only around 15% of the S&P 500’s average annual price rise, highlighting a much more even distribution of returns in the US market. [43]
The same analysis notes that the FTSE 100 is on track to outperform the S&P 500 in 2025 for the first time since 2016, helped by its tilt towards value, energy, financials and income‑generating stocks. [44]
Chris Beauchamp, chief market analyst at IG, stresses that investors shouldn’t be “swept up in short‑term patterns,” but acknowledges that December has “often proved a favourable moment” for those looking to add exposure. [45]
For UK equities, this seasonal tendency sits alongside still‑muted valuations and an improving inflation backdrop, creating a potentially supportive mix if the macro data cooperate and the BoE proceeds with a measured easing cycle.
Outlook: what today’s session is signalling
Put together, Thursday’s subdued but constructive session tells a fairly coherent story about the UK market heading into year‑end:
- Consolidation near all‑time highs
The FTSE 100 is holding close to record levels while absorbing a flurry of macro news, from a “hawkish” Fed cut to weakening housing data and a likely BoE move. That resilience suggests investors are not rushing to take profits despite lingering worries about global growth and AI‑driven tech valuations. [46] - Domestic data still fragile
The RICS survey confirms that the Winter Budget and higher borrowing costs have sapped momentum from the housing market, a key driver of UK consumer confidence. Weakness in buyer enquiries and agreed sales explains some of the ongoing caution towards banks, mortgage‑exposed names and housebuilders. [47] - BoE set to follow the Fed — carefully
With both Bank of America and Morgan Stanley expecting a series of rate cuts starting this month, and gilts already repricing, the BoE is unlikely to surprise by keeping rates on hold. The bigger question is how forcefully it will push back against expectations of rapid follow‑up cuts in 2026. [48] - Stock picking remains crucial
Today’s winners and losers — from AstraZeneca and Sainsbury to Entain and ABF — underline that idiosyncratic news (analyst calls, leadership changes, ex‑dividend dates, strategic deals) can outweigh modest index‑level moves. Investors focusing on balance‑sheet strength, pricing power and dependable cash flows are being rewarded in this environment. [49] - Seasonal tailwinds vs structural questions
The FTSE 100’s powerful historical Santa rally offers a helpful breeze at the backs of UK equity investors, but it comes against a backdrop of weak medium‑term growth forecasts and ongoing political and tax uncertainty. [50]
In short, the UK stock market today is characterised less by dramatic moves and more by a slow recalibration of expectations: easing inflation, softer housing, an impending BoE cut, and a global environment where US tech is no longer the only driver of returns.
For now, London’s blue‑chips look content to bide their time just below record highs, waiting to see whether the BoE, the data and the traditional year‑end rally can keep the FTSE’s remarkable 2025 run intact.
This article is for information only and does not constitute investment advice. Always conduct your own research or consult a regulated financial adviser before making investment decisions.
References
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