LONDON — 29 November 2025
The UK stock market has closed out a highly charged week in which tax hikes, credit‑rating warnings and talk of an AI‑driven equity bubble collided with hopes of interest‑rate cuts and a weaker inflation outlook.
London’s blue‑chip FTSE 100 ended Friday 28 November at 9,720.51, up around 0.3% on the day and roughly 1.7% for the week, but slipping about 0.2% over the month — its first monthly decline in around five months and a break in a four‑month winning streak. Reuters
The FTSE 250 mid‑cap index also added just over 0.3% on Friday to finish near 22,165, yet remains down about 1.4% over the past month as domestic UK stocks lag more globally focused names. Share Talk
FTSE 100 Ends Week Higher but November Rally Stalls
Friday’s modest gain capped a week in which UK equities broadly climbed in response to Chancellor Rachel Reeves’ tax‑raising budget, stronger commodity prices and growing expectations that the US Federal Reserve and Bank of England could cut rates as soon as December. Investing.com
Yet the monthly picture was more muted. According to data compiled by Reuters and TradingEconomics, the FTSE 100 briefly traded about 3% lower for November before recovering to finish the month down only around 0.2%, essentially flat in aggregate but enough to end its recent winning streak. Reuters
Sector performance has been uneven:
- Oil & gas stocks advanced roughly 1.3% on Friday, tracking a rebound in crude prices and hopes that the upcoming OPEC+ meeting will keep supply tight. Reuters
- Chemicals shares rose close to 1%, helped by a broker upgrade for Johnson Matthey. Reuters
- Precious‑metal miners were among the best performers over the month as gold rallied, while aerospace and defence names lagged on renewed speculation about a Russia‑Ukraine peace process. Reuters
On the mid‑cap side, hospitality group Mitchells & Butlers surged more than 11% after posting better‑than‑expected annual profits, even as property‑heavy and consumer‑facing names elsewhere in the market continued to feel the pressure of slower growth and higher taxes. Reuters
Reeves’ Tax‑Heavy Budget: Market Relief with Strings Attached
The week’s defining catalyst was Reeves’ first major budget, delivered on Wednesday 26 November. Equities initially rallied hard: the FTSE 100 jumped 0.9% and the FTSE 250 gained 1.2%, their best single‑day performances in weeks, as investors welcomed a significant increase in the government’s fiscal “headroom” — the buffer built into debt‑reduction plans. Reuters
Key budget points relevant to markets include:
- Around £26 billion in additional taxes, lifting the UK tax burden to its highest level since World War Two. Reuters
- More tax on workers, pension savers and investors, while banks were spared any new targeted levies. Reuters
- A substantial increase in fiscal headroom to nearly £22 billion by 2029–30, which helped push 30‑year gilt yieldsdown by more than 10 basis points on budget day — their biggest one‑day drop since April — signaling that bond investors broadly accepted the plan. Reuters
For equities, the immediate takeaway was clear: a budget that tightens policy mostly through taxes rather than spending cuts, but avoids dramatic surprises, is preferable to a repeat of 2022’s gilt‑market turmoil. Financials and miners led gains as investors focused on lower long‑term yields and the prospect of rate cuts later this year. Reuters
However, the relief rally came with caveats. The budget does comparatively little to boost long‑term growth, a point hammered home by both corporate leaders and economic forecasters. Reuters
Credit‑Rating Agencies and the OBR Turn Up the Pressure
By Friday, the narrative had become more nuanced as credit‑rating agencies and the UK’s fiscal watchdog challenged elements of the government’s story.
S&P Global Ratings reaffirmed the UK’s AA sovereign rating but warned that the country’s fiscal position remains “vulnerable”, citing high debt levels and the risk that the government might dilute budget tightening as the next general election — due by mid‑2029 — approaches. S&P noted that the budget contained few measures to improve growth, even as it forecast a gradual narrowing in the deficit. Reuters
Separately, a letter from the Office for Budget Responsibility (OBR) released Friday showed that Reeves presented a notably bleak picture of productivity and public finances earlier in November even though the OBR had already sent the government more favourable forecasts that offset the productivity downgrade with stronger real wages and inflation. Reuters
The OBR’s chair, Richard Hughes, said the watchdog had taken the unusual step of writing to Parliament to clarify the evolution of its forecasts. Prime Minister Keir Starmer rejected suggestions the government misled markets, insisting that tough choices were needed to rebuild public services and lift living standards. Reuters
For investors, the episode matters because credibility is now central to the UK’s market story. Bond markets may have applauded the extra headroom, but any perception that forecasts are being massaged or that tax rises are politically unsustainable could quickly reverse that goodwill.
Sterling, Gilts and the Risk of a “Confidence Crisis”
Currency and bond markets have, so far, reacted more positively than not.
- Sterling is on track for its best week in over three months, trading near $1.32 — down slightly on Friday but still up about 0.85% on the week — as investors welcomed what they saw as a more disciplined borrowing path. Reuters
- Ten‑year gilt yields have drifted lower, with the Guardian’s rolling market blog noting that 10‑year yields were around 4.44% on Friday, while 30‑year yields fell further as traders priced in less long‑term fiscal risk. The Guardian
At the same time, Oxford Economics warned that the back‑loaded nature of Reeves’ consolidation plan — with a particularly sharp tightening pencilled in for the 2029–30 fiscal year — creates a real risk that markets will “gradually lose faith”, raising the possibility of a sudden confidence shock if investors doubt that promised tax hikes and efficiency savings will actually be delivered. The Guardian
The Citi/YouGov survey added another twist: 12‑month UK inflation expectations fell to 3.7% in November from 4.2%, while longer‑term expectations eased to 3.9%. Economists at Citi argue that this could strengthen the case for a December rate cut by the Bank of England, after the central bank narrowly voted 5–4 to keep rates on hold earlier this month. Investing
Lower expected inflation and the prospect of rate cuts support equity valuations — particularly for higher‑yielding and growth sectors — but they also raise questions about whether the economy is slowing faster than policymakers would like.
AI Bubble Warnings Hang Over Equity Valuations
Beyond the immediate budget drama, a more structural concern resurfaced this weekend: the risk of an “AI bubble” in global tech stocks and its spill‑over into UK public finances.
According to a report covered by The Times, the OBR modelled scenarios in which a sharp correction in AI‑driven global equity markets leads to a sizeable hit to UK tax revenues. In one stress test, a 35% global equity sell‑off was estimated to open a fiscal hole of roughly £26–27 billion, primarily through lower capital‑gains, inheritance and income tax receipts, as well as higher debt‑servicing costs. Even a more modest 15% fall in UK equities alone was judged to have meaningful negative effects on GDP via weaker household wealth and business confidence. Thetimes
The warnings come against a backdrop where the tech‑heavy Nasdaq has roughly doubled in value since early 2023, in large part thanks to AI‑related enthusiasm — a run‑up that central banks in both the UK and euro zone have flagged as a potential source of financial‑stability risk. Thetimes
For UK investors, the takeaway is less about the FTSE 100 — still dominated by energy, financials and consumer staples — and more about overall portfolio vulnerability. If a global AI‑driven sell‑off hits sentiment and tax revenues simultaneously, it could pressure gilts and sterling just as the government leans on markets to fund its fiscal plans.
Sector and Stock Movers: Energy, Travel, Tobacco and Hospitality
Energy: Oil Majors Ride Higher Crude
Shell shares added around 1.1% on Friday, closing near £27.84, outperforming the broader market and leaving the stock only about 5% below its 52‑week high set earlier in November. Marketwatch
The broader Oil & Gas sector was one of the day’s strongest performers as traders positioned ahead of the OPEC+ meeting and monitored renewed geopolitical tensions, with gold and silver also rallying strongly. Reuters
Travel and Airlines: easyJet Extends Rebound
Low‑cost carrier easyJet saw its shares climb close to 3% on Friday to end around £4.99, with trading volumes running above their 50‑day average. Despite the rally, the stock remains roughly 16% below its 52‑week high, underlining how travel names are still catching up after a choppy year for fuel costs and consumer demand. Marketwatch
Tobacco: British American Tobacco Hits New High
Defensive giant British American Tobacco (BATS) continued its strong run, rising about 1.9% to a new 52‑week high near £44.21 on Friday, even on relatively light volume. Marketwatch
With a high dividend yield and relatively predictable cash flows, tobacco remains a go‑to sector for investors seeking income and ballast against macro volatility — though long‑term regulatory headwinds still loom.
Supermarkets and Consumers: Asda Sounds the Alarm
Away from listed names, supermarket chain Asda — now privately owned — offered a sobering view of the real economy. The group revealed that a complex IT separation from former owner Walmart had contributed to a 2.8% drop in like‑for‑like sales in Q3 and warned that a return to underlying sales growth is unlikely before mid‑2026. Reuters
Executive chairman Allan Leighton went further, arguing that the government has “done nothing” to put growth back on the agenda, and that Reeves’ budget left consumers “confused and concerned”. He said additional cost burdens on businesses and households risk keeping Britain “stuck in reverse” unless policy begins to incentivise investment and productivity gains. Reuters
Though Asda itself is not listed, its comments matter for the FTSE’s large roster of retailers, leisure stocks and consumer‑facing real‑estate companies, where margins remain tight and volumes fragile.
Small Caps and AIM: Policy Support, High Volatility
In the small‑cap space, AIM All‑Share ended the week around 2% higher, helped by the budget’s proposed three‑year stamp‑duty exemption on new UK listings and reforms to cash ISA rules aimed at channelling more household savings into domestic equities. Share Talk
But individual names remain extremely volatile, with some micro‑caps swinging 30–100% in a week on funding news, regulatory setbacks or strategic updates — a reminder that while policy tweaks may help liquidity, they don’t remove stock‑specific risk. Share Talk
What 28–29 November Mean for UK Equity Investors
Taking the week and the 28–29 November news flow together, several themes stand out for UK stock‑market participants:
- Relief, Not Euphoria
- The budget eased near‑term fears of a bond‑market backlash and gave the government more fiscal room, helping push equities higher and sterling stronger. Reuters
- But the combination of record‑high tax burdens and modest growth measures means the market is pricing relief rather than a genuine reflation story. Reuters
- Credibility Is Now the Key Asset Class
- The OBR letter, S&P’s “vulnerable” verdict and warnings from Oxford Economics all underscore that investor confidence in the UK’s fiscal story is fragile. Reuters
- Any sign of back‑tracking on medium‑term tightening, or further communications missteps, could quickly spill into gilts, sterling and the equity risk premium.
- Macro Winds Are Slightly Friendlier
- Softer inflation expectations and growing odds of a December BoE rate cut, alongside Fed‑cut speculation in the US, are supportive for risk assets and particularly for higher‑beta cyclical sectors. Investing
- However, these same forces may be signalling a slower growth backdrop, which could weigh on earnings for domestically exposed mid‑caps. Trading Economics
- Global AI Valuations Are a Wildcard
- With the OBR stress‑testing a large AI‑related equity correction and highlighting potential multi‑tens‑of‑billions impacts on UK tax receipts, investors need to think about cross‑asset contagion rather than just sector‑by‑sector risk. Thetimes
- Stock Selection Still Matters More Than the Index
- The week’s moves — from Whitbread’s double‑digit slide on higher property taxes to Mitchells & Butlers’ surge on strong earnings, and from Shell’s steady climb to easyJet’s rebound — underline that company‑specific news and sector positioning continue to drive dispersion. marketwatch.com
Bottom Line
The UK stock market heads into December in better shape than many feared a few months ago, with the FTSE 100 near record territory, sterling firmer and the gilt market calm. But underneath the surface, investors are wrestling with high taxes, fragile growth, questions over fiscal credibility and the spectre of an AI‑driven global correction.
For now, the message from 28–29 November is that markets are giving the UK the benefit of the doubt — but not a blank cheque.
This article is for informational purposes only and does not constitute investment advice. Always conduct your own research or consult a qualified adviser before making investment decisions.
