Weekly market update - October 2025

Market update

Global stocks posted solid gains last week, returning +1.0% in GBP terms. Much of the movement in stocks came on Wednesday, where markets shrugged off the shutdown of the US government and reacted to weakness in economic data. Data from the private data processing firm ADP indicated that US payrolls fell by 32,000 in September, driving rate cut expectations lower (official data has been delayed by the shutdown). This drove stocks and bonds higher: In GBP terms, US stocks were up +0.5% over the week, UK stocks were up +2.3%, EU stocks were up +2.8% and EM stocks were up by +3.1%. In the US, the healthcare sector was the strongest performer as Pfizer reached a deal with the United States government, driving up sentiment in the wider sector.

Government bond yields were mostly down on lower rate expectations for the Federal Reserve. US 10-year treasury yields were down by -5 basis points, while the equivalent yields for the UK and Germany were down by -6 and -4 basis points, respectively. A Supreme Court ruling that Federal Reserve Governor Lisa Cook can stay in her role at the Federal Reserve was notable this week, but it did not appear to result in upward pressure on yields.

The dollar lost value against both the GBP as well as gold over the week on lower rate expectations: GBP was up +0.6% versus the dollar, while gold rose by +3.4% in USD terms (+2.8% against GBP).

Macro news

Early Budget Details

This week, Chancellor of the Exchequer Rachel Reeves gave some indications of the policies that could be introduced in the next UK budget. While Reeves reiterated election pledges not to raise income tax, corporation tax, national insurance and VAT, she declined to rule out extending the current freeze on income tax thresholds, which was due to end after 2028. Reeves hinted at higher taxes on gambling and ruled out introducing higher wealth taxes. She also indicated that the two-child benefit cap would be lifted in the next budget. Prime Minister Keir Starmer stressed in a BBC interview that no final decisions had been made and that revisions to policy could be subject to economic forecasts from the OBR – which is due to release forecasts on Friday 3^rd, and is widely expected to downgrade the outlook for UK productivity.

US Government Shutdown

The US government began a shutdown on Wednesday after Republican and Democratic politicians failed to resolve a budget dispute. The event, which had been widely anticipated in recent weeks, marks the first shutdown of the US government in almost 7 years. The shutdown is set to affect as many as 1.6 million federal employees and result in closures or partial closures of services, including economic data reporting, small business loans and medical research. It is set to delay the US non-farm payrolls report, usually due on Friday 3rd.