FTSE 100 Reaches Record Territory: What Drove the Index Higher?

FTSE 100 Reaches Record Territory: What Drove the Index Higher?

London's benchmark FTSE 100 index (UK100) pushed into uncharted waters on Tuesday, surpassing 9,897 points in intraday trading to establish a new record according to ActivTrades data. This milestone reflects deteriorating labour market conditions that have weakened sterling and raised expectations for monetary policy easing, alongside good performance from pharmaceutical giant AstraZeneca, the index's largest constituent.

Daily FTSE 100 Chart - Source: ActivTrader

Labour Market Weakness Fuels Rate Cut Expectations

Cooling Employment Conditions

The UK labour market continues to show clear signs of strain. The unemployment rate rose to 5% in the three months to September—the highest level in four years—up from 4.8% previously and matching levels last seen during the early stages of the post-pandemic recovery in 2021.

The weakness extends beyond the headline figure. Payrolled employee estimates fell by 117,000 between September 2024 and September 2025, while more recent data shows consecutive monthly declines of 32,000 in both September and October—the sharpest two-month contraction since late 2020.

Wage Pressures Finally Easing

For the Bank of England, wage growth trends carry major policy implications. Annual earnings growth excluding bonuses slowed to 4.6% in the three months to September, down from 4.7% in August. Adjusted for inflation, real wage growth has fallen to its weakest pace since August 2023.

The Bank closely tracks private sector pay growth excluding bonuses, which eased to 4.2%—the softest level since February 2021 and perfectly in line with the Bank’s forecasts. This slowdown is significant because stubbornly high wage growth had been one of the main barriers to rate cuts. With pay pressures now moderating, the argument for easing monetary policy has strengthened. However, it also highlights growing slack in the economy, suggesting that rate reductions may soon be needed to stimulate growth (which could be the biggest argument in favor of a rate cut).

What to Expect from the December BoE Meeting

The Bank of England’s November decision to hold rates at 4% revealed growing internal divisions. The Monetary Policy Committee’s 5–4 vote split showed nearly half the members already favouring an immediate rate cut.

More tellingly, the MPC’s risk balance has shifted—policymakers now view the risk of weakening demand as more pressing than inflation remaining above target. While the UK inflation rate stands at 3.8%, higher than most G7 peers, the BoE expects it to fall gradually and only return to the 2% target by mid-2027.

Markets have adjusted expectations accordingly. Money markets now price in roughly 65 basis points of cuts by the end of 2026, compared with 55 basis points before Tuesday’s labour data. Traders also assign a 73.6% probability that the BoE will lower rates to 3.75% in December.

The December 18 meeting will be crucial, as policymakers will have access to new inflation and employment data, as well as Chancellor Rachel Reeves’ November 26 budget, which is widely expected to include significant tax hikes. Should fiscal tightening weigh further on growth, it could reinforce the case for monetary easing before year-end.

AstraZeneca Powers the FTSE 100 Higher

Strong Quarterly Results

AstraZeneca’s stock hit an all-time high above £13,444 on Tuesday, extending a rally that began after its third-quarter earnings release on November 6. The Anglo-Swedish pharmaceutical giant reported core EPS of $2.38, up 12% year-on-year and ahead of expectations ($2.29), while revenue rose 10% at constant currency to $15.19 billion, surpassing forecasts of $14.79 billion.

Growth was broad-based, led by strong sales across its oncology and cardiovascular divisions. The U.S. market, accounting for over 40% of total revenue, delivered $6.55 billion (+9%), while China, the second-largest market, contributed $1.76 billion (+5%) despite persistent pricing pressures.

Strategic Outlook

CEO Pascal Soriot reiterated confidence in achieving AstraZeneca’s ambitious $80 billion annual revenue target by 2030, supported by upcoming drug launches, expanding market share, and resilient pricing power in key regions.

While patent expirations—such as on Farxiga, a key diabetes and heart medication—pose risks, management expects new products to offset those headwinds. Notably, the company maintained its full-year guidance rather than raising it, citing generic competition and rising operational costs, which tempered some investor enthusiasm but reinforced its reputation for prudent financial management.

Impact on the Index

AstraZeneca’s advance carries outsized weight on the FTSE 100 due to its 7.91% index weighting—ahead of HSBC (7.82%) and Shell (7.08%). A 7% rise in a few days and a 25% gain year-to-date exert a significant mathematical pull on the overall index, amplifying its push into record territory.

Daily AstraZeneca Chart - Source: ActivTrader

Sources: Reuters, Research FTSE Russell, Office for National Statistics, The Guardian

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