27th October 2025

U.S.

Equity markets:
• U.S. stocks advanced over the week, overcoming volatility linked to headlines about U.S.–China trade relations and a rise in oil prices following sanctions imposed on Russia’s two largest oil firms.
• The small-cap Russell 2000 Index and S&P MidCap 400 Index outperformed the large-cap benchmarks.
• Within the S&P 500 Index, information technology and energy sectors led the gains, while utilities and consumer staples sectors underperformed.

Inflation comes in below estimates:
• The ongoing U.S. government shutdown disrupted the release of key economic data.
• Despite the disruption, the Bureau of Labor Statistics released September’s inflation data on Friday, 24 October—over a week late—to enable the Social Security Administration to calculate its annual cost-of-living adjustment.
• Headline inflation rose to 3.0% year on year, compared with 2.9% in August, but came in below Bloomberg’s consensus forecast of 3.1%.
• Core inflation, excluding food and energy prices, registered 3.0%, a slight decline from the prior month.

Business activity accelerates in October:
• Early readings from S&P Global’s purchasing managers’ indexes (PMIs) suggested an acceleration in business activity.
• The composite PMI, combining manufacturing and services, rose to 54.8 from 53.9 in September—its 33rd straight month above the 50 mark that signals expansion.
• The services PMI increased to a three-month high of 55.2, highlighting ongoing sector strength.
• Manufacturing PMI rose modestly to 52.2 from 52.0, showing improving conditions.
• Manufacturers’ optimism, however, weakened to its second-lowest level since June 2024 amid concerns about tariffs and policy uncertainty.

Treasury yields and fixed income:
• U.S. Treasury yields moved in different directions, falling early in the week before drifting higher ahead of the inflation report.
• One- and three-year Treasury yields ended higher, while the 10-year yield declined.
• Bond prices and yields move inversely.
• T. Rowe Price traders reported that markets increasingly expect the government shutdown to continue through month-end, potentially affecting data releases and monetary policy expectations.
• Municipal bonds performed strongly, supported by healthy investor demand and limited new supply.

Europe

Market performance:
• The pan-European STOXX Europe 600 Index rose 1.68% in local currency terms.
• National markets also gained: Germany’s DAX rose 1.72%, Italy’s FTSE MIB increased 1.44%, France’s CAC 40 gained 0.63%, and the UK’s FTSE 100 jumped 3.11%.

United Kingdom – inflation steady and retail resilience:
• Headline UK inflation remained unchanged at 3.8% for a third consecutive month, defying forecasts of a slight increase to 3.9%.
• Core inflation edged lower to 3.5% from 3.6% in August, suggesting easing underlying pressures.
• Financial markets significantly raised expectations for an interest rate cut in December.
• Retail sales surprised positively, expanding for a fourth consecutive month in September, rising 0.5% month on month.
• Strong performance came from online jewellers, boosted by demand for gold, and in non-store retail and computer and telecommunications segments.
• Economists had anticipated a 0.4% decline in retail sales.

Eurozone – business activity strengthens:
• Eurozone business activity reached its highest level since May 2024, supported by the strongest increase in new orders in two and a half years.
• The HCOB Flash Eurozone Composite PMI Output Index rose to 52.2 from 51.2 in September, exceeding consensus expectations of around 51.1.
• The services PMI climbed to a 14-month high of 52.6.
• Manufacturing PMI improved for the eighth consecutive month, rising to 50.0 from 49.8.
• Germany’s solid output growth supported the overall improvement.
• France continued to lag, with business activity contracting for a 14th straight month and at its fastest pace since February.

Eurozone – consumer sentiment improves:
• Eurozone consumer confidence rose to -14.2 in October, its highest level in eight months, up from -14.9 in September.
• The figure beat market expectations of -15.0, according to the European Commission’s early estimate.
• Confidence across the European Union also improved, increasing 0.8 points to -13.5.

Japan

Equity markets and political developments:
• Japanese equities rose sharply, with the Nikkei 225 Index gaining 3.61% and the TOPIX Index up 3.12%.
• Investors welcomed the election of Liberal Democratic Party (LDP) leader Sanae Takaichi as prime minister, expecting her pro-growth, fiscally supportive agenda to benefit markets.
• The LDP formed a coalition with the Japan Innovation Party (JIP), ensuring relative political stability despite lacking an outright majority in both parliamentary houses.
• The government is expected to secure support on key bills from smaller neutral opposition parties.

Currency and bond markets:
• Anticipation of a large-scale stimulus programme led to yen weakness, with the currency depreciating to around JPY 152.9 per U.S. dollar from JPY 150.6 the previous week.
• Improved risk appetite reduced demand for safe-haven assets.
• The 10-year Japanese government bond yield rose to 1.65% from 1.62%.
• The political uncertainty preceding Takaichi’s appointment had lowered expectations for a rate hike at the Bank of Japan’s late-October meeting, with markets now forecasting an increase no earlier than December.

Inflation trends:
• Core consumer price inflation remained above the Bank of Japan’s 2% target, rising 2.9% year on year in September from 2.7% in August.
• The increase was largely driven by higher energy and food prices.

China

Market performance:
• Mainland Chinese equity markets gained strongly, led by technology-related shares.
• The CSI 300 Index rose 3.24%, and the Shanghai Composite Index advanced 2.88%, according to FactSet.
• Hong Kong’s Hang Seng Index climbed 3.62%.

Economic growth and data:
• China’s GDP expanded 4.8% year on year in the third quarter, which the statistics bureau described as laying a “solid foundation” for achieving the official growth target of around 5% in 2025.
• Retail sales grew 3.0% year on year in September—the slowest pace since November 2023—indicating weak consumer demand.
• Fixed asset investment unexpectedly fell 0.5% year on year in the first nine months of the year.
• Industrial output rose a stronger-than-expected 6.5% year on year in September, driven by robust export growth.

Policy and structural developments:
• The data highlighted persistent domestic demand weakness amid a prolonged housing market slump and ongoing deflationary pressures.
• Policymakers face growing pressure to stimulate consumption and reduce high household saving rates amid global trade protectionism.
• China announced plans to “greatly increase” its scientific and technological self-reliance over the next five years.
• The government also pledged to maintain manufacturing’s share of the economy at a “reasonable” level while advancing industrial modernisation.
• These goals were outlined in a communiqué concluding the fourth plenum of the Communist Party, which defined priorities for the 15th Five-Year Plan (2026–2030).

Other Key Markets

Hungary:
• The National Bank of Hungary (NBH) kept its base rate unchanged at 6.50% during its scheduled policy meeting.
• The overnight collateralised lending rate, the upper limit of the rate corridor, remained at 7.50%, and the overnight deposit rate, the lower limit, stayed at 5.50%.
• Policymakers noted slight improvement in the global economic outlook, though uncertainty persists due to ongoing trade and geopolitical tensions.
• They observed that the decline in global inflation has slowed, citing risks from supply chain fragmentation, food prices, and strong service-sector price dynamics.
• Hungary’s economy was described as exhibiting “duality,” with construction output declining sharply while order backlogs increased.
• Retail sales growth slowed, and industrial production continued to weaken.
• Policymakers expect both domestic and external conditions to support renewed growth from 2026 onwards.
• Headline inflation in September stood at 4.3%, with core inflation at 3.9%.
• The strengthening forint has helped lower inflation by reducing import and producer prices.
• Inflation is expected to remain above the tolerance band for the rest of 2025.
• The NBH reiterated its commitment to a tight monetary stance aimed at maintaining positive real interest rates and anchoring inflation expectations.
• The central bank targets achieving its 3% inflation goal sustainably by early 2027.
• Consequently, rates were left unchanged.

Turkey:
• The Central Bank of the Republic of Türkiye (CBRT) reduced the one-week repo rate from 40.5% to 39.5%.
• The overnight lending rate was lowered to 42.5% from 43.5%, and the overnight borrowing rate was reduced to 38.0% from 39.0%.
• Policymakers reported that the underlying inflation trend strengthened in September, with headline inflation rising to 33.29% year on year from 32.95% in August—the first increase in more than a year.
• Officials noted that disinflation has slowed, and risks—particularly from food prices—have become more pronounced.
• The CBRT reiterated its commitment to maintaining a tight monetary policy until price stability is achieved.
• Officials did not rule out further rate cuts but stated that future decisions will depend on realised and expected inflation dynamics.
• The bank emphasised that any further easing would ensure sufficient monetary tightness consistent with the disinflation path.
• Policymakers also warned that they would tighten monetary policy again if inflation deviates significantly from projected targets.

PLEASE NOTE:

This content is for informational purposes only and should not be construed as investment advice or a specific recommendation to act on any investment. It is importnat to assess your own circumstances before making investment decisions. The views expressed are as of the date indicated and whilst we believe the information is from reliable sources, we do not guarantee it’s accuracy. Past performance is not indicative of future results, and all investments carry market risks, including the potential loss of the principal.