Market Commentary 15th December 2025 – from Jamie Annand

The Office for National Statistics published its October 2025 economic data, pointing to another month of stagnation in the UK economy. Weak UK economic data led to a selloff in the FTSE 100 and FTSE 250 at the end of last week.

The British economy contracted 0.1% month-over-month in October 2025, marking the fourth consecutive month without economic growth for the UK economy. After showing signs of growth in September, the services sector also suffered a slight decline, with the largest negative contributions coming from wholesale and retail trade as well as the repair sector for motor vehicles and motorcycles.

The United Kingdom has posted its largest goods trade deficit since 2022, with the gap widening to £22.54 billion in October 2025, up from £18.88 billion in September and surpassing market expectations of a £19.3 billion shortfall. The fall in exports was driven by a decline of 3.0% in shipments to non-EU countries. By contrast, exports to the EU rose by 1.7%, highlighting the importance of UK-EU trade relations amidst global uncertainty. Goods imports rose 6.8% to an eight-month high of £53.51 billion, while services imports increased 0.4% to a four-month high of £28.32 billion.

Germany’s consumer price inflation held steady at 2.3% in November 2025, confirming preliminary estimates and matching October’s rate. Energy costs fell, with declines in electricity and district heating offsetting higher prices for heating oil and fuel. Meanwhile, France’s annual inflation rate stood at 0.9% in November 2025, unchanged from October and in line with the preliminary estimate. Energy prices in France also fell whilst food inflation ticked up slowly.

US stocks suffered from steep losses posted to AI-exposed companies, including Nvidia and Oracle. The pullback reflects margin concerns and growing caution around AI-linked names, even as the Federal Bank’s recent rate cuts continue to underpin broader sentiment.

The Federal Reserve cut the federal funds rate by 25 bps to a range of 3.5%–3.75% in its December 2025 meeting, following similar reductions in September and October, and in line with expectations. This brings borrowing costs to their lowest level since 2022, initially leading to gains across the Dow Jones Industrial Average and S&P 500 in the first half of last week. Policymakers left their projections for the federal funds rate unchanged from September, signalling only one 25bps cut in 2026, offering investors some relief over doubts of whether the Federal Bank would stop lowering borrowing costs in 2026.

Chinese stocks benefitted after Beijing reaffirmed broad economic support for the coming year during its annual economic planning meeting. Policymakers pledged proactive fiscal measures aimed at strengthening consumption and investment, alongside steps to stabilize the property sector.

However, analysts still expect only modest monetary easing from the central bank next year.

Japan’s industrial production rose 1.5% month-on-month in October 2025, slightly above the flash estimate of 1.4% but slower than the 2.6% increase in September. It marked the second consecutive monthly gain, supported by continued strength across key sectors. Motor vehicle production surged alongside electrical machinery and information and communication electronics. On an annual basis, industrial production grew 1.6%, easing from September’s 3.8% but still marking the second straight year-on-year increase.

GBP / EUR – Current 1.1390 Previous 1. 1448

The British pound edged slightly lower after fresh data showed the UK GDP unexpectedly contracted by in October, marking the fourth consecutive month without growth and defying expectations for a 0.1% increase.