British stocks ended Friday lower while the pound remained stable against the U.S. dollar. Analysts noted that the recent rise in sterling is likely driven by a short squeeze rather than a change in how investors assess UK sovereign risk. Across Europe, equity markets delivered mixed results.
The FTSE 100 fell 0.5%, while the GBP/USD stayed flat but held above 1.33. In contrast, Germany’s DAX gained 0.7%, and France’s CAC 40 slipped 0.1%.
UK Market Overview
Bank of America revised its outlook for the European energy sector for 2026. The bank downgraded Shell and BP, while upgrading Neste to a bullish rating. Analysts expect weaker oil and gas prices, along with falling refining margins, to pressure free cash flow next year. They added that share prices for Europe’s major oil producers already reflect a long-term Brent forecast of around $65, limiting further upside. Shell shares dropped 1.4%, and BP declined 2.6%.
Elsewhere in the UK market, Elementis shares rose 4.1% after Bank of America upgraded the stock to Buy. The bank also raised its price target from 170p to 200p, pointing to stronger strategic direction under CEO Luc van Ravenstein.
MONY Group shares fell 2.9% after a downgrade from Morgan Stanley, which cut its rating to Equal-weight. The bank expressed concerns about how emerging “agentic AI” technology may disrupt the company’s price comparison model. Despite this, the 220p price target was maintained, implying moderate upside but limited near-term catalysts.
Ocado shares surged nearly 10% in early trading after announcing it would receive a $350 million payment from Kroger. The U.S. retailer is closing three robotic fulfillment centers and cancelling a fourth site, leading to the January cash settlement. Despite the initial jump, Ocado ended the session only 0.3% higher.
Big Yellow Group fell 4.3% after Blackstone confirmed it would not proceed with a takeover offer. This followed Big Yellow’s statement that discussions had ended and the firm would not extend the deadline under the UK takeover code. Blackstone’s withdrawal triggers Rule 2.8 restrictions, preventing it from making another offer in the near term.
Housing market data from Halifax showed price growth slowing. House prices were unchanged in November after a 0.5% rise in October. The average property value increased slightly by £139 to £299,892, reaching a new record. Annual growth fell to 0.7%, the weakest reading since March 2024.
In currency markets, sterling continues to strengthen. ING said the rally is still driven by a short squeeze rather than a shift in investor sentiment about UK creditworthiness. The narrowing Gilt swap spread supports this view, falling from 58 basis points in September to 48 basis points. ING expects GBP/USD to end the year at 1.34 but anticipates weaker performance against the euro as the Bank of England begins easing in December.
J.P. Morgan initiated coverage of Greggs with an Overweight rating and a December 2027 price target of 2,110p. This suggests roughly 35% upside. The bank said Greggs is trading at trough valuations despite strong operating performance and clear catalysts for recovery.
J.P. Morgan also took a more cautious view of European oil and gas stocks heading into 2026. The brokerage cited stretched valuations and potential oversupply. Although the sector outperformed the broader European market by 6% in the second half of 2025, Brent prices have fallen 7% over the same period. The firm now considers valuations “full,” estimating a 2026 free cash flow yield of 7.8% at $62 Brent — above long-term norms.
In corporate news, Halma acquired E2S Group for £230 million in cash. The deal will expand Halma’s footprint in industrial safety technology, including fire detection and alarm systems. The acquisition will be funded through existing credit facilities.
