Market overview – Richard Carter, Head of Fixed Interest Research
Trade tariffs came back to the fore of investors’ minds last week, after US President Donald Trump threatened to slap additional 100% tariffs on China and cancel a planned summit with President Xi Jinping. This followed China’s plans to impose export controls on rare earth minerals which are critical to key technologies, such as smartphones and electric vehicles. According to the Financial Times (FT), China controls around 70% of rare earth mining.
The news didn’t go down well with markets – the main US stock benchmark was off 2.7% on Friday. By the weekend Trump had adopted a more conciliatory tone with the President declaring on social media “The U.S.A. wants to help China, not hurt it!!!” Flash in the pan, or the start of a renewed bout of tariff-induced volatility? Time will tell.
It was all quiet on the economic data front due to the US government shutdown which led to a host of expected data, including the Labor Department’s jobless claims numbers, not being released. There wasn’t a complete data vacuum. Numbers from non-government entities still hit the wires. In its Monthly Budget Review, the Congressional Budget Office (CBO) estimated a US$1.8tn budget deficit for the 2025 fiscal year ended 30 September. That means, despite the much-publicised cost-cutting exploits of Elon Musk and the Department of Government Efficiency plus a jump in tariff revenues, the budget was unchanged on the previous year. The culprit, rising government expenditure. Interest on public debt, a notable contributor here. On at least one measure this hit US$1tn. Should the shutdown persist for an extended period, expect the budget deficit to come under even closer scrutiny. Lack of official government releases didn’t hold back stock markets from setting new highs with the main US equity indices closing at record levels on Wednesday 8 October. Markets were on the back foot from then on, however, finishing the week lower as the threat of a tariff war reared its head once more.
Unsurprisingly gold had a good week, closing above the US$4,000 per ounce level for the first time. The usual reasons of geopolitical and global economic/tariff concerns were cited. One of those geopolitical concerns, conflict in the Middle East, could be on the wane following the signing of the Gaza ceasefire deal. A few more ceasefires from Trump and perhaps gold’s geopolitical driver could run out of steam.
Weekly economic announcements:
The MSCI All Country World Index declined 2.1% last week with year-to-date gains now standing at 17.4%.
United States:
Main US stock benchmarks fell 2.4% (+12.5% YTD) over the course of the week with Friday’s tariff-triggered declines more than cancelling out gains made earlier in the week. US Treasuries were up as yields fell in response to US-China trade tensions - the 10-year Treasury yield decreased by nine basis points (0.09%) ending at 4.03% (down -54 basis points YTD).
With a lack of major economic data releases, focus was on the release of the Federal Reserve’s September policy meeting minutes. These showed policymakers having divergent views on the conflicting economic signals of persistently high inflation on the one hand and a weakening labour market on the other. Elsewhere, preliminary October data from the University of Michigan's consumer sentiment survey came in at 55.0 from 55.1 in September.
United Kingdom:
UK equity benchmarks outperformed global markets, albeit by falling less. The UK’s top tier index declined 0.6% (+18.7% YTD). The pound weakened slightly against the dollar, ending the week at US$1.34 down from 1.35. Over the week, the 10-year UK gilt yield decreased by two basis points (bps), ending at 4.67% (up 11bps YTD).
Whisper it, but there could be tentative signs that London’s IPO (initial public offering) drought is easing after not one, but two companies announced plans to come to market, while a third successfully completed its IPO – all in the space of a few days.
Challenger bank Shawbrook Group has said it intends to apply for its shares to be admitted to the Official List. Canned tuna company Princes Group made a similar announcement the previous Friday, the same day The Beauty Tech Group was admitted to the main market with a £300m market capitalisation, after successfully raising £106.5m.
Assuming the Shawbrook and Princes IPOs go ahead, Q4 could soon match the number of IPOs seen in Q3 as a whole. According to Ernst & Young, there were just three IPOs in Q3, all on AIM, raising a total of £16.3m. YTD there have been a total of 12 listings across London’s markets.
Europe ex UK:
European equity indices followed global markets’ lead - the MSCI Europe ex UK Index was down 1.2% (+14.0% YTD). Germany’s main index was off 0.6% but is still showing a healthy 21.8% gain for the year so far; Italy’s bourses fared worse down 2.8% (+27.8% YTD); while France was off 2.0% (+10.7% YTD). The euro also dipped against the US dollar, closing the week at US$1.16 from 1.17 previously. The 10-year German bund yield declined by six basis points (0.06%), ending at 2.64% (up 28bps YTD). Weakness in European equity markets was not just down to tariff tensions but local issues too, notably the political situation in France. At the beginning of the week, Prime Minister Sébastien Lecornu handed in his resignation. By the end of the week, he had been reappointed. A case of as you were then.
Approver: Quilter Cheviot 14 October 2025
