Shaw and Partners

US stocks began the week on positive footing, amid signs of a de-escalation of US-China trade tensions. The prior Friday stocks had seen their steepest sell-off since April as Trump had threatened a 100% tariff on Chinese imports, but over the weekend it appeared the two sides were back on track to meet at the end of the month. Nevertheless, trade sentiment remained in a delicate balance, with stocks back under pressure on Tuesday as Trump posted he was considering ending some trade ties with China, as well as tit-for-tat port fees coming in to effect.

Major bank earnings were generally positive, however regional banks came under pressure on Thursday. There were concerns after some banks revealed they had been hit by bad or fraudulent loans. Despite the volatility, US markets managed to log weekly gains. The S&P 500 was up 1.7% and the Dow Jones Industrial Average added 1.6%. The Nasdaq Composite rose 2.1%, with ongoing optimism around artificial intelligence including news that OpenAI is partnering with Broadcom. Federal Reserve chair Jerome Powell noted that downside risks to employment have shifted the balance of risks in the economy, indicating that the central bank remains on track to cut rates. US Treasury yields declined over the week, with the 10-year yield dropping below 4% on Thursday, reaching its lowest level since October 2024.

European markets ended higher for the week, with the STOXX 600 ending modestly higher, up 0.4%. Similar to the US, it benefited from the improved trade narrative and more dovish Fed comments, whilst being unnerved by the US regional banks. Within the region earnings were in focus, with the luxury sector buoyant following positive results from LVMH and EssilorLuxottica. French stocks outperformed with the CAC 40 index gaining 3.2%, its best performance in almost six months. It found support after Prime Minister Lecornu survived no confidence motions.

Japanese equities declined over the week, with the Nikkei 225 down 1.1% while the yen strengthened. There was also political uncertainty after the Komeito Party quit the ruling coalition, leaving the Liberal Democratic Party to try and establish a new coalition. The trade tensions pressured Chinese markets, with the Shanghai Composite dropping 1.5% while the Hang Seng was down almost 4%. Precious metals were the best gainers of the week, with gold up 5.9% and silver rising 6.6% with investors seeking out the ‘safe-havens’. Gold had reached a record high of above $4,300 per ounce.

Weekly macro highlights

Eurozone inflation accelerates

Eurozone consumer price index (CPI) inflation increased by 2.2% year-on-year (YoY) in September, up from August’s 2.0%, according to data published by the statistical office of the European Union. These figures confirm the first flash release seen earlier this month. Of the main components of inflation, services registered the highest annual rate, increasing to 3.2% in September, compared with 3.1% in August. This is followed by food, alcohol and tobacco, which registered an increase of 3.0% YoY this month. Core inflation, which excludes energy and unprocessed food, stood at 2.4% YoY in September, increasing from 2.3% YoY in the prior month. Across eurozone countries, headline inflation in France saw a -1.1% month-on-month (MoM) change, while Italian inflation increased 1.3% MoM in September. Germany’s headline inflation registered a 0.2% increase, while Spanish inflation increased marginally by 0.1% MoM. Markets continue to anticipate the European Central Bank will keep rates unchanged at their next meeting.

UK GDP expands in August

The United Kingdom’s gross domestic product (GDP) grew by 0.3% in the three months to August 2025, slightly above the previous period’s 0.2% growth, according to the Office for National Statistics. This improvement was mainly supported by steady services output, which grew by 0.4% in the three months to August, and a 0.3% rise in construction. Production output declined by 0.3%, continuing to lag despite a smaller decline in comparison to the previous month. On a monthly basis, GDP edged up 0.1% in August, after dipping in July. The latest figures align with the Bank of England and the IMF’s projections, with annual growth at 1.3%. While August’s data met market expectations, it highlights ongoing challenges, especially in manufacturing, which remains weak on a YoY basis. The Bank of England will factor in these results, along with a softer labour market and wage growth, ahead of its November meeting. Markets expect no further rate cuts this year.

Eurozone inflation accelerates

UK GDP expands in August

China inflation falls in September

According to data published by the National Bureau of Statistics of China, the country’s consumer price index (CPI) inflation fell by 0.3% YoY in September, slightly less than market expectations and just below the 0.4% YoY decline recorded in August. Food prices contributed to this, declining by 4.4% YoY in September, compared to a 4.3% in August. In contrast, non-food inflation accelerated to 0.7% from 0.5% the previous month. Despite the continued decline in the overall CPI, core CPI, which excludes volatile food and energy prices, rose by 1.0% YoY, marking its highest level since February 2024. Additionally, the producer price index fell by 2.3% YoY, compared to a 2.9% YoY print in August. These results were broadly in line with market consensus and indicate further signs of stabilisation as domestic demand, industrial upgrading, and policy support help reduce price declines and strengthen underlying inflation.