Fed cuts rates ahead of BoE decision

This week’s markets were shaped by anticipation of the Federal Reserve’s year-end meeting, at which it cut interest rates by 25 basis points. All eyes are now on the Bank of England ahead of its interest rate announcement next week. 

The FTSE 100 was +1.0% over the week by mid-session on Friday, with the more UK-focused FTSE 250 trading down 0.4%.

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Donald Trump

The current US-Venezuela confrontation has intensified sharply as President Trump amasses a formidable military presence – 11 warships, tens of thousands of troops, fighter jets and the aircraft carrier USS Gerald R Ford – in the Caribbean under the guise of an anti-drug campaign, while authorising lethal strikes on suspected drug vessels, seizing oil tankers and imposing sanctions on figures linked to President Nicolás Maduro. Venezuela bristles at what Caracas deems a blatant attempt at regime change, denouncing the airspace closure declaration as a “colonialist threat” and warning of guerrilla-style resistance, including militia mobilisation and sabotage across more than 280 locations. The US, framing the pressure as necessary to curb drug trafficking and narco-terrorism, has escalated penalties further by sanctioning Maduro’s nephews and Venezuela-linked vessels for alleged narcotics and oil smuggling. With both military posturing and legal manoeuvres in play, the crisis risks destabilising the region and straining international law while diplomatic channels appear sidelined. 

President Trump signed an executive order to prevent states from introducing their own artificial intelligence (AI) regulations, aiming to replace a growing patchwork of state laws with a single national standard to preserve US competitiveness in the global AI race. The order calls for creation of an “AI Litigation Task Force” within the Department of Justice to challenge state laws deemed “onerous”, while the Commerce Department will identify those requiring AI models to alter “truthful outputs”. States that defy the federal framework could lose discretionary federal funding, including broadband grants. Supporters argue a unified approach will prevent compliance burdens that could hinder innovation and counter China’s centralised system, while critics warn it undermines state autonomy and removes safeguards on issues such as discrimination, deepfakes and consumer protection. 

President Trump launched his controversial “Gold Card” visa scheme, offering a fast‑track route to US permanent residency for wealthy foreigners who pay a $1 million “gift” to the Treasury, alongside a non‑refundable $15,000 processing fee and a DHS background check. Applicants receive EB‑1 or EB‑2 visas in weeks – far quicker than traditional green card routes – while corporations can sponsor staff via a $2m contribution per employee, with a premium $5m “Platinum Card” offering nearly full‑year US stays tax‑free on foreign income. Trump and Commerce Secretary Howard Lutnick frame it as a way to attract top talent and bolster government revenue, yet critics call it a “pay‑to‑play” path to citizenship that bypasses standard investment and job‑creation requirements.

Economics 

The Federal Reserve this week delivered a 25 basis‑point rate cut, trimming its federal funds target to 3.50%-3.75% in a 9‑3 vote, its third reduction this year amid weakening job growth and stubbornly high inflation. Chair Jerome Powell described the decision as a guarded “insurance” move, signalling a likely pause in further easing until the economy – or rather fresh labour-market and inflation data – provide clearer guidance. The cut eases borrowing costs for mortgages, credit and business loans, potentially giving the housing market and consumer spending a modest lift, though savers will feel the squeeze. Market reaction was positive, with equities rallying and Treasury yields falling, even as the Fed’s “dot plot” forecasts only one more cut next year, underscoring a delicate balance between supporting growth and controlling price rises. 

Ahead of the decision, October’s delayed Job Openings and Labor Turnover Survey (Jolts) report was released. It showed job openings holding steady at 7.67 million in October, virtually unchanged from September, signalling a gradually cooling labour market. Hiring and separations remained flat at around 5.1 million, while quits – the key barometer of worker confidence – hovered near 3.2 million, the lowest level since early 2020. Meanwhile, layoffs rose to approximately 1.9 million, the highest since January 2023, suggesting companies are tightening belts amid economic headwinds. The data underlines a labour market that is decelerating but not collapsing, offering the Federal Reserve room to tread carefully on further rate cuts while they weigh upcoming inflation and employment signals. 

The UK economy stagnated in October as gross domestic product GDP fell 0.1% month‑on‑month – the second consecutive drop following September’s decline – dragged down by a 0.3% slide in services and a sharper 0.6 % fall in construction, even as production bucked the trend with a 1.1% bounce. Over the three months to October, GDP also dipped 0.1%, marking the first quarterly contraction since late 2023, as production slid 0.5% and construction lost 0.3%, while services remained flat. The sluggish performance underlines persistent weakness in household‑facing and investment‑heavy sectors, signalling that growth remains fragile.

The British Retail Consortium’s November retail sales monitor showed a tepid 1.2% year‑on‑year rise in like‑for‑like sales, the slowest pace in six months and well below expectations of around 2.5%, as Black Friday failed to spark strong consumer spending while shoppers remained jittery ahead of the Autumn Budget. Food sales decelerated to 3.0%, though still outperforming last year, and non‑food sales were virtually flat at just 0.1% growth, albeit a significant recovery from a 7.9% decline a year ago. The report underscores a cautious mood among UK consumers, suggesting that policymakers and retailers may need to manage expectations for a weaker holiday season and indicates that credit‑fuelled spending may be losing momentum under economic and political uncertainty. 

Geopolitics

Ukrainian and Western mediators remain locked in intense diplomacy as Kyiv finalises a 20‑point peace proposal – with security guarantees – from Brussels and London ahead of presenting refined terms to Washington this week, even as Russian President Vladimir Putin meets US envoy Steve Witkoff in Moscow to consider a US‑draft framework. Tensions are escalating, however, as Ukraine continues to reject Moscow’s demands for territorial concessions in Donbas and rerouted elections, while Trump’s envoys press Kyiv to compromise. Moscow has signalled it is “ready for serious discussions” but has yet to budge on key Kremlin preconditions, and Russia continues military strikes even as talks proceed -underscoring the gulf between diplomacy and battlefield realities. 

Companies

Oracle shares tumbled after its second-quarter earnings report because, despite posting stronger-than-expected profits, the company missed Wall Street’s revenue forecasts and signalled sharply higher spending ahead. The software giant reported earnings per share of $2.26, boosted by a one-off $2.7bn gain from selling its stake in chipmaker Ampere, but revenue came in at $16.06bn - slightly below analyst expectations of $16.21bn. Investors were also unsettled by Oracle’s plans to ramp up capital expenditures to around $50bn this fiscal year, $15m more than previously projected, as it races to expand cloud infrastructure for artificial intelligence clients. The combination of a revenue miss, reliance on non-recurring gains, and aggressive spending outlook sparked a sell-off, sending shares down more than 10% in the wake of the statement. 

Ashtead Group reported a mixed set of second-quarter results, with profits down but revenues edging higher, while reaffirming its full-year outlook and unveiling a major buyback plan. The industrial equipment rental giant saw pretax profit fall 12% to $571m, as adjusted earnings slipped 2% to $1.38bn, missing consensus expectations. Despite the softer quarter, Ashtead announced a $1.5bn share repurchase programme to coincide with its planned move of primary listing to New York, underscoring confidence in long-term cash generation even as US non-residential construction markets remain sluggish.

British American Tobacco reaffirmed its 2025 guidance in a pre-close trading update, reporting steady revenue growth and unveiling a £1.3bn share buyback programme. The FTSE 100 tobacco giant said it expects around 2% growth in both group revenue and adjusted profit from operations this year, with its “New Category” division – covering vapes and oral nicotine – accelerating to double-digit growth in the second half. Strong momentum in the US market, particularly from its Velo Plus oral products, helped offset regulatory headwinds in Asia-Pacific and Africa. BAT also noted that early enforcement against illicit vapor products in the US has boosted volumes for its Vuse brand. The company reaffirmed its 2026 guidance, highlighting confidence in its mid-term growth targets despite ongoing declines in traditional tobacco volumes.

The Magnum Ice Cream Company, spun off from Unilever, made its debut on Euronext Amsterdam on 8 December, with shares opening at €12.20 and climbing to around €13, valuing the business at roughly €7.8-€7.9 billion – just under its 2024 revenue of €7.9bn. As the world’s largest standalone ice‑cream maker, managing iconic brands such as Magnum, Ben & Jerry’s and Cornetto across 80 countries, the listing marks a strategic shift: freeing the business from Unilever’s broader portfolio to sharpen its focus, drive productivity and accelerate innovation. 

Ferguson Enterprises reported its first-quarter results, posting sales of $8.2bn, up 5.1% year-over-year, alongside a gross margin of 30.7% and an operating margin of 9.4%. Earnings were ahead of market expectations. Chief executive Kevin Murphy highlighted confidence in both residential and non-residential markets despite macroeconomic uncertainty, updating full-year guidance to reflect approximately 5% net sales growth and an adjusted operating margin of 9.4–9.6%. 

Berkeley Group reported resilient half-year results, showing profits slightly down but ahead of expectations, while reaffirming its full-year outlook. For the six months ended 31 October 2025, the UK housebuilder posted pre-tax profit of £254m, down from £275m a year earlier but above analyst forecasts. Revenue slipped 7.8% to £1.18bn, yet operating margin edged higher to 20.8%, underscoring strong execution in a tough housing market. Despite subdued demand and regulatory pressures, Berkeley highlighted robust fundamentals in the London housing market and a pipeline of 14,000 plots, positioning it to deliver long-term shareholder value under its “Berkeley 2035” strategy.