Market Commentary 8th December 2025 – from Naigil Johnson

The S&P Global UK Manufacturing Purchasing Managers’ Index (PMI) for November, demonstrated UK manufacturing returned to expansion, with activity moving above the neutral point for the first time since September 2024. Output grew for the second consecutive month, underpinned by firmer domestic demand and a softer contraction in export orders, while new business stabilised following more than a year of decline.

The UK service sector PMI continued to expand, though at a slower pace than in October. Business activity growth eased amid weakening demand both domestically and internationally, which appeared to suggest that the momentum in services is slowing.

The UK housing market showed further signs of cooling. The Halifax House Price Index rose 0.7% year-on-year in November 2025, easing from 1.9% in October and marking the slowest growth since March 2024. The slowdown primarily reflects the stronger price rises seen a year earlier, which appeared to indicate that the market’s pace of expansion is gradually slowing.

The HCOB Germany Manufacturing PMI fell in November as the manufacturing sector returned to contraction, with activity falling at the sharpest pace since February. The decline was driven by a renewed fall in new orders, reversing most of the gains seen in recent months amid ongoing customer uncertainty and weaker overseas demand. Meanwhile, the German service sector continued to expand for the third consecutive month, though the pace of growth moderated from October’s near two-and-a-half-year high level.

The HCOB Manufacturing PMI demonstrated that France’s manufacturing sector also experienced a sharper contraction in November, with output declining at the fastest rate since February. Production cuts were most pronounced in consumer and investment goods, while intermediate goods saw a slower decline. The French service sector, however, returned to expansion for the first time since August 2024, supported by renewed growth in output and the first monthly increase in new business in over a year.

France’s central government deficit narrowed in October, reaching its smallest shortfall since June 2025. The improvement was underpinned by stronger revenue growth, led by higher net personal income tax, corporate tax, and other tax receipts, reflecting a gradual recovery in the public finances.

The ISM Manufacturing PMI showed that US manufacturing continued to contract in November, marking the ninth consecutive month of decline and at a slightly faster pace than in October. The slowdown was driven by softer new orders, weaker supplier deliveries, and ongoing restraint in employment.

By contrast, the US services sector maintained its expansion, with growth strengthening to the fastest pace in nine months. Business activity and new orders both expanded, and the backlog of orders reached its highest level since February, which appeared to suggest emerging momentum and a gradual recovery in services.

The University of Michigan Consumer Sentiment Index showed consumer confidence in the US improved for the first time in five months, supported by more optimistic expectations for personal finances, particularly among younger households. The modest rebound seemed to suggest tentative gains in household sentiment amid a challenging economic backdrop.

China’s manufacturing sector slipped back into slight contraction in November, as the RatingDog China General Manufacturing PMI fell below the neutral level for the first time since July. Factory output and new orders were largely stagnant, with renewed job cuts and subdued purchasing activity weighing on the sector. In comparison, the Chinese services sector continued to expand, although at its slowest pace since June. Growth in new business eased, but new export orders returned to expansion amid easing trade uncertainty with the US, providing a modest boost to the sector.

Japan’s manufacturing sector remained in contraction for the fifth consecutive month, according to the S&P Global PMI, though the pace of decline softened compared with earlier in the year. The Japanese services sector continued its run of expansion, with November marking the eighth straight month of growth. Activity was supported by the first acceleration in new orders in three months, even as export demand fell for a fifth consecutive month.

Japanese consumer confidence improved in November, reaching its highest level since April 2024. Improvements were seen across multiple areas, with gains in overall standard of living, income growth, employment outlook, and willingness to purchase durable goods, reflecting growing optimism among households.

GBP / EUR – Current 1.1448 Previous 1.1411

The pound rose by 0.32% against the dollar last week as markets seemed to remain focused on the Federal Reserve’s easing path. Against the euro, the pound rose by 0.70% over the same period as investors appeared to weigh diverging rate outlooks with the single currency bloc against expectations of a stronger UK economy.