Market overview - Tim Armitage, Investment Strategist
It’s been a bright start to the new week for equities, with European markets opening higher and US futures rising to record highs after upbeat comments from weekend trade talks between US and China. Following two days of trade negotiations in Kuala Lumpur US Treasury Secretary Scott Bessent announced a successful framework had been agreed upon which US president Trump and Chinese leader Xi Jinping could discuss at their meeting later this week.
Threats of a ramping up of US tariffs sent stocks sharply lower earlier in the month but there has been a swift recovery, with US markets not only recouping losses but moving up to new record highs. The current US-China trade truce is set to expire on 10 November. In less positive news, Trump declared a 10% rise in Canadian tariffs on Saturday after seemingly taking offence to a television advert in Ontario showing Ronald Reagan talking about tariffs.
US inflation rises, but less than expected
The US September Consumer Price Index (CPI) was released last week, delayed by the ongoing government shutdown. The data showed a 3% annual increase, up from 2.9% in August but below consensus forecasts among economists of a 3.1% rise. The report indicated retailers are passing off some tariff-related costs to consumers, in areas such as apparel and sporting goods.
However, the figures suggest that a resurgence in price pressures is yet to transpire following the imposition of far higher trade tariffs. In September, the US collected US$30bn in tariff revenue. The Federal Reserve will likely welcome the latest data and see little reason for it to deter them from lowering interest rates at their meeting this week.
Although the CPI data was released, this does not suggest that we can expect more important economic releases to occur during the government shutdown. The data was seen as important to the government in determining cost-of-living increases for social security payments and therefore treaded as something of a one off.
Weekly economic announcements:
Last week the MSCI AC World Index gained 1.8% (21.0% YTD).
United States:
US stocks marginally outperformed global benchmarks last week, rising 1.9% (16.7% YTD). Tech stocks did better, adding 2.3% (20.8% YTD). Strong third quarter earnings figures underpinned the rise, with 24% of MSCI North America having now announced and 86% beating estimates. Growth stocks outperformed value stocks and small caps gained more than large caps. This week five of the Magnificent Seven companies are set to report and this, alongside the Fed meeting and Trump-Xi talks, will likely determine market sentiment for the US and further afield.
United Kingdom:
UK stocks rose 3.1% last week (21.6% YTD), boosted by a strong performance among energy names as the oil price gained on additional Russian sanctions. Mid-caps also did well, adding 3.5% (12.5% YTD). A depreciation in sterling was also additive, with the pound ending the week at US$1.33, down from US$1.34. Gilt yields fell, with the 10-year gilt yield declining 10 basis points (0.1%) to 4.43% (13 basis points lower YTD).
Europe ex UK:
European stocks rose but lagged a little on the week, rising 1.2% (16.3% YTD). German equities added 1.7% (21.8% YTD), Italian bourses gained 1.7% (29.1% YTD) and French benchmarks underperformed, rising 0.6% (15.1% YTD). The European Central Bank (ECB) is expected to hold rates unchanged this week, which, should it occur, would be the third consecutive meeting with no change in interest rates. The latest economic data points to an improvement in the Eurozone with purchasing mangers’ indices (PMIs) beating forecasts.
Approver: Quilter Cheviot 28 October 2025
