The FTSE 100 index managed to close in positive territory on Thursday, 4th December 2025, as growing anticipation of a monetary policy shift from the United States Federal Reserve buoyed investor sentiment, overshadowing starkly negative domestic economic data.
Markets Bet on Fed Pivot Despite Domestic Gloom
The blue-chip index finished the session 18.80 points, or 0.2%, higher at 9,710.87. The domestically-focused FTSE 250 also advanced, gaining 69.54 points (0.3%) to close at 22,070.99. This upward movement occurred against a troubling backdrop for the UK economy, as a key survey revealed construction activity contracted at its most rapid pace in five and a half years during November.
Matt Britzman, an analyst at Hargreaves Lansdown, noted the prevailing market mood. "Investors are leaning into the idea that easier policy is coming, which is fuelling appetite for risk and lifting everything from blue chips to small caps," he said. However, he cautioned that the path ahead remains uncertain, with crucial inflation data and the Fed's decision still pending. "Expectations have swung wildly over the past month, so assuming any cuts are a done deal could be a costly mistake," Britzman added.
UK Construction Sector Hits Catastrophic Low
The day's most alarming economic release came from the UK construction sector. The S&P Global UK Construction Purchasing Managers' Index (PMI) plummeted to 39.4 in November from 44.1 in October, marking the eleventh consecutive month of decline. Any reading below the 50-point threshold indicates contraction.
Rob Wood of Pantheon Macroeconomics described the figures as pointing to "catastrophic conditions in the construction sector, with the activity balance showing the sharpest output fall since the country was in lockdown in May 2020." He attributed part of the profound pessimism to budget speculation unsettling firms, though he believes the PMI survey is overly gloomy relative to likely actual output.
The rate of decline was the steepest recorded since May 2020, highlighting the severe pressures facing the industry. Wood warned that while performance may slightly outperform these dire survey results, risks remain firmly tilted to the downside for the coming months.
European Equities and Currency Movements
European markets broadly echoed the positive sentiment. The CAC 40 in Paris rose 0.4%, while Frankfurt's DAX 40 climbed 0.8%. A significant driver for European carmakers was speculation that US President Donald Trump might seek to relax stringent fuel economy standards, potentially easing pressure on manufacturers struggling with electric vehicle competition from China.
Joshua Mahony of Scope Markets commented, "While this is a move aimed at lowering costs for US consumers, it also provides a shot in the arm for European carmakers." The sector received a further boost from Bank of America, which upgraded several automakers including Renault and Porsche SE.
In currency markets, the pound edged higher to 1.3353 US dollars at the London close, up from 1.3342 a day earlier. The euro softened slightly to 1.1658 dollars. In the bond market, the yield on the benchmark US 10-year Treasury note widened to 4.10%.
FTSE 250 Sees Dramatic Swings
The FTSE 250 index witnessed some extreme individual stock movements. Travel food operator SSP Group surged by 11% after reporting a trading momentum boost and announcing a strategic review of its European rail business.
In stark contrast, consumer review platform Trustpilot collapsed by 32% following a damning short-seller report from Grizzly Research. The report accused the company of employing aggressive tactics to force businesses into paid subscriptions, claims that Trustpilot vehemently denied as "selective, misleading and framed to support a predetermined narrative." Baltic Classifieds also fell sharply, down 14%, after warning of squeezed margins.
Among the FTSE 100 constituents, the top performers included 3i, Burberry, and Rolls-Royce. The biggest laggards were Entain, Diageo, and the London Stock Exchange Group.
Looking ahead, investors are keenly focused on Friday's release of the US core PCE inflation data—the Federal Reserve's preferred gauge—along with the Michigan consumer sentiment index. In the UK, the Halifax house price index is due for publication.
