Weekly Market Review - 01-12-2025

Eloise Bell
3 days ago
5 min read

Global markets steadied this week, with major indices advancing as investors responded to improving inflation expectations and resilient corporate earnings. Sentiment was broadly constructive across regions, supported by stronger risk appetite and a calmer macro backdrop following recent volatility. In the UK, fiscal developments dominated the political and market narrative after the Chancellor’s Budget, while in the US and Europe, attention continued to centre on labour-market conditions, policy signals and the trajectory of economic activity heading into year-end. Commodities saw renewed strength, central banks flagged emerging financial-stability risks, and geopolitical cooperation featured prominently as nations deepened strategic partnerships. Overall, the week delivered a more balanced tone, with markets cautiously optimistic as they assess prospects for 2026.

Market Recap.

Global equities posted solid gains over the week, with UK and US benchmarks advancing across the board. The FTSE 100 ETF rose 2.07%, supported by broad-based strength across domestic sectors. In the United States, sentiment remained constructive, with the Dow Jones Industrial Average ETF climbing 1.42%, the S&P 500 ETF up 1.03%, and the Nasdaq 100 ETF gaining 1.12% as investors responded positively to easing inflation expectations and resilient corporate performance. The overall tone was one of cautious optimism as markets continued to stabilise following recent volatility.

News.

Controversy escalated this week following Chancellor Rachel Reeves’s Budget, with critics accusing the government of overstating fiscal challenges to justify sweeping tax rises. Reeves rejected claims she misled the public, insisting she had been “honest and upfront” about limited headroom and the need to stabilise public services. Tory leader Kemi Badenoch called for her resignation, while former chancellor Nadhim Zahawi urged her to clarify her position before regulators intervene. Reports also suggested some ministers felt they were not fully briefed on OBR forecasts, adding to internal tension. Prime Minister Keir Starmer is expected to defend the Budget and reaffirm its growth ambitions.

For deeper analysis of the policy decisions and economic implications, read our article: The 2025 Budget: We Are Rebuilding Our Economy.

Inflation.

The UK’s medium-term inflation outlook eased slightly last week after the Office for Budget Responsibility projected price growth will average 2.50% in 2026, moving closer to the Bank of England’s 2.00% target but remaining above it. According to the OBR, the path back to stable inflation will be gradual, with lingering pressures in services and wage growth slowing the pace of disinflation. While the Budget is expected to help moderate headline inflation, underlying trends still limit the scope for rapid monetary easing. The updated forecast reinforces expectations that interest rates will fall only cautiously over the coming year.

Central Banks.

The European Central Bank highlighted rising vulnerabilities linked to the strong US dollar, warning that euro-area banks face growing exposure to currency-driven funding risks. In its latest assessment, the ECB cautioned that a sharp dollar appreciation could strain institutions reliant on dollar-denominated wholesale markets for liquidity. As the report notes, “A further strengthening of the US dollar could increase rollover risks for euro area banks with sizeable short-term dollar funding needs.”

The ECB said it is monitoring these pressures closely, adding that while overall bank resilience remains solid, global exchange-rate volatility poses a material risk that could tighten financial conditions across the eurozone.

Commodities.

Gold moved higher over the week, trading near US $4,218/oz, supported by a softer US dollar and renewed demand for defensive assets amid elevated policy uncertainty. Silver also strengthened, buoyed by firm investor inflows into precious-metal markets. In energy markets, oil prices edged up, with Brent crude rising to around US $63.40/barrel and WTI nearing US $59.60/barrel, following signs of supply restraint from OPEC+ and modest stabilisation in demand indicators. Overall, the backdrop remains mixed: precious metals continue to benefit from risk-off sentiment, while crude oil remains constrained by uneven global demand and persistent concerns about oversupply.

ESG.

The UK’s Financial Conduct Authority issued updated guidance this week to support companies preparing for upcoming sustainability-disclosure requirements. The revisions emphasise proportional, decision-useful reporting, reducing burdens for smaller firms while improving consistency and comparability for investors. The move was welcomed by markets as a constructive step that strengthens governance standards without adding unnecessary complexity, helping to improve the credibility of corporate sustainability data ahead of the UK’s full transition to ISSB-aligned reporting frameworks.

Geopolitics.

The UK and Japan strengthened their strategic partnership this week following a defence ministerial meeting that advanced cooperation across emerging technologies, cyber-security, and joint development programmes such as the Global Combat Air Programme (GCAP). Both governments described the talks as highly constructive, reaffirming their shared commitment to stability in the Indo-Pacific and deeper industrial collaboration. The enhanced framework is expected to support UK supply chains, spur innovation in next-generation defence systems, and reinforce long-term diplomatic alignment—offering a broadly positive signal for geopolitical and economic cooperation.

Week Ahead.

United States: The week in the United States begins with Monday’s release of the ISM Manufacturing PMI for November, offering an early read on industrial momentum as year-end approaches. Attention then shifts to Wednesday’s ADP employment report, providing a preview of private-sector hiring ahead of the main labour-market release. The key data arrive on Friday, 5 December, when nonfarm payrolls, the unemployment rate and earnings figures are published. These releases will be closely monitored for signs of wage pressures and labour-market cooling, helping shape expectations around the Federal Reserve’s policy path into early 2026.

Eurozone: Across the Eurozone, the week begins on Tuesday with the release of November’s flash HICP inflation estimate alongside the October unemployment rate, offering a timely snapshot of price pressures and labour-market dynamics across the bloc. On Thursday, retail-sales data for October are published, providing further insight into consumer demand. Together, these indicators will help investors assess whether easing inflation is being matched by stabilising activity as the European Central Bank evaluates conditions heading into 2026.

United Kingdom: In the UK, no major official data releases are scheduled for the week. Instead, markets will focus on post-Budget sentiment, business surveys and housing-market indicators, including early-December readings from private-sector providers. With households and firms still absorbing the Chancellor’s fiscal measures, policymakers’ commentary and market reaction will play a key role in shaping expectations for domestic momentum into the final month of the year.