UK Stock Market Week Ahead: FTSE 100 Braces for Bank of England Decision After Weak GDP and Fed Cut (15

London’s stock market heads into the final full trading week before Christmas with a familiar combination of catalysts: a Bank of England (BoE) rate decision, fresh UK inflation and jobs data, and global risk sentiment shaped by the US Federal Reserve’s latest cut — plus renewed “AI angst” that rattled Wall Street late last week. The FTSE 100 finished Friday at 9,649.03, while investors weighed a surprise UK GDP contraction against rising conviction that borrowing costs will fall again in the days ahead. ^[1]

What happened across 8–14 December 2025 (including market-moving headlines through Friday’s close and weekend previews) sets up a high-stakes “macro-to-micro” week in the UK: the policy outlook for rates, sterling, and gilts will likely dominate first — but company updates from retailers, distributors, travel, and financial services could still swing individual names. ^[2]

Where the UK market stands after 8–12 December: the themes that shaped sentiment

1) Central banks drove the rhythm — and the Fed’s cut wasn’t a clean “risk-on” trigger

The week began with UK equities drifting lower as investors positioned for the Fed and BoE. On Monday, homebuilderswere among the biggest drags, and Unilever slipped after news around its planned Magnum Ice Cream separation and listing considerations. ^[3]

By Thursday, however, London’s mood improved after the Fed struck a “softer tone” than some investors feared — helping lift the FTSE 100, led by precious metal miners as gold and silver prices rose. ^[4]

But Friday reminded markets that rate cuts don’t eliminate valuation concerns: a US-led sell-off, amplified by fears of a potential AI bubble, spilled into Europe and pulled the FTSE 100 back into the red. ^[5]

2) UK growth disappointment hardened the case for a December BoE cut

The most important domestic macro shock came Friday: Reuters reported UK GDP fell 0.1% in October and 0.1% over the three months to October, leaving the economy not having grown since June — a backdrop that reinforced market pricing for rate cuts. ^[6]

The GDP weakness also fed through to FX and rates: sterling dipped and gilts rose after the data, consistent with investors leaning further into a “lower rates ahead” narrative. ^[7]

3) The consumer picture looked fragile — and markets reacted quickly to retail warnings

Midweek signals on spending were downbeat. Reuters highlighted that Barclays card spending fell 1.1% year-on-year in November, while the British Retail Consortium’s measure of spending at big retailers slowed to 1.4% growth — both pointing to a cautious consumer into Christmas. ^[8]

That theme sharpened on Friday when Card Factory issued a profit warning during the peak trading period, citing weaker confidence and footfall; its shares fell sharply. ^[9]

4) Banks and defence were key swing factors inside the FTSE 100

Banks outperformed at points during the week. On Wednesday, the FTSE 100 edged up as HSBC and Standard Chartered climbed after an upgrade from BofA Global Research, lifting the broader bank sector. ^[10]

Defence stocks also helped at times. Reuters noted BAE Systems rose after reports German lawmakers were set to approve record defence contracts, supporting the wider European defence complex. ^[11]

5) “Year-end plumbing” is quietly back in focus for sterling markets

Beyond headline rates, the Bank of England flagged the likelihood of year-end pressures in sterling repo markets, tied to dealer balance sheet constraints and seasonal demand for liquidity. The BoE also noted it scheduled the final Short-Term Repo (STR) operation of 2025 for 23 December, closer to year-end, and encouraged firms to plan funding and ensure operational readiness. ^[12]

This matters for equity investors because money-market conditions can affect bank funding sentiment, gilt volatility, and broader risk appetite — especially in thin December trading.

The main event: Bank of England decision on Thursday 18 December

Markets are entering the week with a clear base case: a 25bp cut.

A Reuters poll found all economists surveyed expected the BoE to cut Bank Rate to 3.75% on 18 December, with many also anticipating another cut by end‑March — but with less consensus on the path beyond that, reflecting the tension between easing growth and still-elevated inflation. ^[13]

Why the decision could still feel “knife-edge” even if a cut is delivered:

Inflation is falling, but not back to target. Reuters noted UK inflation eased to 3.6% in October, and the November print is due before the meeting — a key swing input for the MPC. ^[14]
The committee has been split. Reuters’ reporting and market commentary continue to emphasise a finely balanced MPC, increasing the odds of a close vote and careful guidance even if rates are lowered. ^[15]
Growth is clearly fragile. The GDP contraction and “no growth since June” narrative raise the pressure to support activity. ^[16]

For investors, the key is not just the headline cut — it’s the tone. Any hint the BoE is nearing “neutral,” or that future cuts will be slower/conditional, could move gilt yields and sterling quickly and reshape sector leadership (banks vs. rate-sensitive defensives, domestic cyclicals vs. multinationals).

UK data calendar: jobs, CPI, and activity signals that could move the market

The UK market’s “week ahead” setup is unusually clean: most of the inputs that matter to the BoE arrive just in time to influence expectations.

What to watch most closely:

UK labour market data (Tuesday 16 December): Investors will look for whether unemployment is still edging up and whether wage growth is cooling — crucial for the BoE’s confidence that inflation pressures are easing. ^[17]
UK inflation (Wednesday 17 December): With the MPC meeting the next day, CPI is the biggest single “yes/no” risk to market conviction around a cut and the guidance that follows. ^[18]
Flash PMI surveys: Business surveys can either reinforce the “soft landing with disinflation” view or revive fears that the UK is slipping into a deeper stagnation patch. ^[19]

Overlaying this is a broader global data pulse (including PMIs and inflation prints across major economies), which matters because the FTSE 100 is globally exposed and often trades as much on commodity moves and risk appetite as on domestic UK metrics. ^[20]

Global backdrop: Fed cuts, ECB holds, and the risk sentiment question

The Fed: cut delivered — but the path looks less straightforward

Reuters reported that the Fed lowered rates by 25bp in a divided vote, but signalled rates were unlikely to fall much further in the near term while it waits for labour market clarity. That nuance matters: it can cap the “easy financial conditions” impulse even after a cut, and it complicates how markets price 2026. ^[21]

The ECB: expected to stay on hold — potentially for longer

A Reuters poll suggested the European Central Bank was expected to hold rates at 2% at its December meeting, with many economists looking for no change well into 2026 under a “stable outlook” view. ^[22]

For UK investors, ECB “steady” and Fed “easing but cautious” creates an interesting cross-current: sterling can be tugged by relative policy expectations, and UK multinationals (large in the FTSE 100) can be sensitive to currency swings.

AI volatility: the late-week shock that could carry into Monday

Friday’s London reversal was directly linked to a US sell-off driven by worries about the durability of the AI-led rally. Reuters cited fears of a potential AI bubble after chip-related results, which hit broader sentiment across Europe. If US tech remains jittery, it may cap upside for UK equities even if domestic data supports a BoE cut. ^[23]

Company diary: the UK names and sectors to watch (15–19 December)

Corporate news is lighter than in earnings season — but several updates are well-timed for year-end positioning.

Hargreaves Lansdown’s corporate calendar highlights these scheduled UK reporters and statements:

Tuesday 16 Dec: Hollywood Bowl Group (full-year results), WH Smith (full-year results)
Wednesday 17 Dec: Bunzl (full-year trading statement), IntegraFin (full-year results)
Thursday 18 Dec: Currys (half-year results)
Friday 19 Dec: Carnival (Q4 results) ^[24]

Why these matter now

Retail and discretionary spending: After Card Factory’s profit warning, the market will be sensitive to anything that looks like a wider Christmas slowdown or margin pressure — especially commentary on footfall, promotions, and cost inflation. ^[25]
Currys and UK consumer electronics: Any shift in demand trends, credit availability, and promotional intensity could be read as a proxy for the broader UK discretionary mood. ^[26]
Bunzl and “defensive cyclicals”: Distributors often sit at the intersection of costs, volumes, and pricing power — and guidance can influence sentiment across UK industrial defensives. ^[27]
Carnival and travel demand: HL notes Carnival has raised guidance in recent quarters and that forward bookings were strong at the last update, but also flags that next year’s outlook may be the key driver as comparisons get tougher. ^[28]

Sector watch: how the FTSE 100 could react to next week’s catalysts

UK index composition means sector leadership can change quickly when rates, FX, and commodities move. Based on the news flow from 8–12 December, here are the areas likely to stay in focus:

Banks: Often benefit from higher-for-longer narratives, but can stay resilient if cuts are gradual and credit conditions hold up. Last week showed how upgrades and positioning can move the group quickly. ^[29]
Precious metal miners: The late-week tape highlighted how gold/silver moves can dominate day-to-day performance. If risk sentiment stays choppy, “hedge” trades may remain supported. ^[30]
Defence: Headlines around European defence spending continued to act as a tailwind for select names. ^[31]
UK domestic cyclicals and housebuilders: Sensitive to BoE expectations and mortgage pricing. Early-week weakness in homebuilders underscored how rate expectations still matter into year-end. ^[32]
Retail: The consumer is the fragile link right now — as shown by spending data and profit warnings. ^[33]

A late‑2025 trend worth noting: buybacks remain a major support pillar

While macro headlines are grabbing attention, corporate capital returns continue to underpin UK equities. Financial News reported that FTSE 100 companies had unveiled £56.6bn of buybacks in the year to 5 December 2025, citing AJ Bell data — keeping repurchases near record pace. ^[34]

For the “week ahead,” buybacks are not usually a single-day catalyst — but they can help explain why dips are being bought in certain large-cap UK names despite mixed growth data, and why some investors continue to frame the UK market as “cheap with cash returns.”

Three scenarios for the FTSE 100 in the week ahead

Base case (most likely):
UK CPI and jobs data do not derail expectations, and the BoE cuts to 3.75% with cautious guidance. That would likely support rate-sensitive domestics (select retailers, builders, mid-caps) — but overall index direction may still hinge on US risk sentiment and commodities. ^[35]

Upside scenario:
Inflation surprises lower and UK data remains soft-but-stable, encouraging markets to price a smoother easing path. Sterling could weaken, which often boosts FTSE 100 multinationals via translation effects, while gilts rally and ease financial conditions. ^[36]

Downside scenario:
Inflation proves sticky (or wages re-accelerate), pushing the BoE toward a “hawkish cut” or a hold. At the same time, further US tech volatility could hit global risk appetite. That mix could pressure UK cyclicals and leave defensives/commodity-linked names as the main support. ^[37]

Bottom line for investors

After a week in which the UK market absorbed a Fed cut, a UK GDP contraction, and a late Wall Street sell-off, the next few sessions are set up to be decisively macro-driven. The BoE decision on 18 December, bracketed by jobs and CPI releases, is the clearest near-term driver for sterling, gilts, and rate-sensitive UK equities — but the FTSE 100 may still take its directional cues from global risk appetite and commodity prices into thin year-end liquidity. ^[38]

This article is for information only and is not investment advice.

References

UK Stock Market Week Ahead: FTSE 100 Braces for Bank of England Decision After Weak GDP and Fed Cut (15–19 December 2025)