Shaw and Partners

US stocks kicked off the week on positive footing, with all three major indices closing at record highs. This was fuelled by a rally in technology shares, following news that Nvidia was to invest up to $100bn in OpenAI. However, momentum changed as investors locked in to comments from Federal Reserve policymakers for signs on the future path of monetary policy. Speaking on Tuesday, Chair Powell stated that the economy was in a “challenging situation” as it weighs up downside labour market risks against upside inflation risks. Furthermore, he noted that “equity prices are fairly highly valued” raising concerns about valuations.

The key data for the week was the personal consumption expenditures (PCE) index, released on Friday, in which inflation rose 2.7% year-on-year in August, while core PCE rose 2.9%. With the figures coming in as expected this helped to support the market mood. Despite stocks managing to snap their three-day losing streak this was not enough to prevent weekly losses. The S&P 500 declined 0.3%, the Dow Jones Industrial Average fell 0.1% while the tech-heavy Nasdaq Composite dropped 0.7%. The majority of S&P sectors ended weaker, however the energy sector advanced. It was supported by higher oil prices, following a surprise drop in US stockpiles as well as President Trump putting pressure on the EU to phase out Russian oil and gas. US Treasury yields nudged slightly higher, with the 10-year yield ending at 4.18%. meanwhile the US dollar saw its second consecutive week of gains.

European markets also assessed the monetary policy situation, with the Swiss National Bank going on hold while Sweden’s Riksbank cut its policy rate by 25 basis points. Healthcare stocks came under pressure after the US Department of Commerce revealed that it had launched a national security probe into personal protective equipment and medical items, as well as robotics. Later President Trump announced that branded and patented drug imports would face a 100% tariff. The fact that this would not apply to those who already have or plan to build manufacturing plants in the US helped to lessen the blow. For the week the pan-European STOXX 600 ended little changed, while regional indices saw some gains.

Japanese pharmaceuticals were also hurt by the Trump tariffs. However, markets overall advanced for the week, with the Nikkei 255 up 0.7% while the broader Topix index rose 1.3% to end at a record high. The Tokyo consumer price index remained steady in September but came in softer-than-expected complicating the picture as to how soon the Bank of Japan will hike interest rates. There were little catalysts in China, but the market continued its recent gains with a high level of domestic liquidity. For the week, the Shanghai Composite was up 0.2% however Hong Kong’s Hang Seng dipped 1.6%.

Weekly macro highlights

SNB holds rates in September

The Swiss National Bank (SNB) kept its key interest rate unchanged at 0%, as widely anticipated by markets. This marks the SNB’s first pause after seven consecutive meetings with rate changes, following the start of rate cuts in March 2024. According to the SNB, inflationary pressures remain virtually unchanged from the previous quarter. Since the last monetary policy assessment, inflation has edged up slightly, from -0.1% in May to 0.2% in August, mainly due to increased tourism and higher prices for imported goods. The SNB noted that Switzerland’s economic growth stayed weak in the second quarter, and unemployment has continued to rise in recent months. The SNB reports that the economic outlook has worsened, largely because of higher US tariffs, with machinery and watchmaking industries particularly affected. The SNB still expects GDP to grow between 1.0% to 1.5% in 2025, but projects growth just below 1.0% for 2026, with unemployment likely to increase.

US economy grows in Q2

US gross domestic product (GDP) increased at an annual rate of 3.8% in Q2 2025, according to the third estimate released by the US Bureau of Economic Analysis. This represents an upward revision of 0.5 percentage points from the previous estimate. The GDP figure for Q1 was revised downward, registering a decrease of 0.6%. The Q2 upturn in GDP reflected a downturn in imports and an acceleration in consumer spending that were partially offset by reduced investment. Real final sales to private domestic purchasers, which sums consumer spending and gross private investment, increased 2.9% in the second quarter, an upward revision of 1.0 percentage point from the previous estimate. Personal consumption rose at an annualised rate of 2.5%, up sharply from the second estimate’s 1.6%. The government’s first estimate of third-quarter GDP is scheduled to be released next month.

Japan CPI inflation remains steady

Tokyo consumer price index (CPI) inflation, a strong leading indicator for nationwide inflation in Japan, rose 2.5% year-on-year (YoY) in September, according to data published by the Statistics Bureau of Japan. Core CPI inflation, which excludes changes in prices for fresh food, remains steady at 2.5% YoY, slightly below market expectations for a 2.8% YoY print. Excluding both fresh food and energy inflation, core-core CPI inflation was also at 2.5% YoY, down from 3.0% the previous month. Food inflation, excluding the cost of fresh food, slowed to 6.9% YoY in September, from 7.4% YoY in August. The slower-than-expected inflation this month was largely attributed to measures by the Tokyo metropolitan government to ease the impact of higher living costs, including reductions in childcare fees and water bills. This data will be closely monitored by the Bank of Japan at its upcoming policy meeting on 30 October.