Summary of the week - 10 Oct 25

Interest Rates

US:

The Federal Reserve lowered its benchmark federal funds rate by 25 basis points to a new target range of 4.00%–4.25% following its scheduled two-day policy meeting — a widely anticipated decision. One of twelve voting members dissented, preferring a deeper 50 bps reduction, signaling that the Committee remains divided on the pace of future easing.

UK:

The Bank of England voted to hold the Bank Rate steady at 4%, maintaining its restrictive stance. Policymakers noted continued progress in disinflation following prior supply shocks, supported by tight monetary conditions, though inflation still remains above the 2% target.

EU:

The ECB’s September meeting minutes revealed broad agreement that current policy settings remain consistent with achieving the 2% medium-term inflation goal. While some officials viewed inflation risks as tilted to the downside and others to the upside, consensus held that existing rates are sufficiently restrictive to handle near-term shocks.

JPN:

The Bank of Japan kept its short-term policy rate at 0.5% during its September 2025 meeting, marking the highest level since 2008. The move was in line with market expectations and reflects a cautious approach amid political transition and yen volatility.

Inflation

US:

The University of Michigan’s Consumer Sentiment Index for October 2025 came in at 55, little changed from 55.1 in September and slightly above expectations of 54.2. Households reported better current finances and one-year business outlooks, but weaker future personal finance expectations. Year-ahead inflation expectations edged lower to 4.6% (from 4.7%), while long-run expectations held steady at 3.7%, suggesting inflation perceptions are slowly stabilizing.

UK:

UK headline CPI remained unchanged at 3.8% year-on-year in August 2025, in line with expectations and near the highest levels since early 2024. Price pressures eased in transportation (2.4% vs. 3.2%), services (4.7% vs. 5.0%), and recreation and culture (3.2% vs. 3.4%), while motor fuel prices provided the largest upward contribution. Inflation remains well above target, keeping the BoE cautious despite signs of cooling momentum.

EU:

Eurozone consumer inflation accelerated slightly to 2.2% in September from 2.0% in the prior three months, edging above the ECB’s 2% mid-point target. The pickup was driven largely by a smaller decline in energy prices (-0.4% vs. -2.0%), while core inflation — excluding energy and food — remained stable at 2.3%, its lowest since early 2022.

JPN:

Japan’s CPI eased to 2.7% year-on-year in August, down from 3.1% in July, the lowest reading in nearly a year. The decline was led by steep falls in electricity (-7.0%) and gas (-2.7%) costs due to government subsidies. Price gains slowed in household goods, healthcare, and recreation, while transport, clothing, and communications saw modest acceleration.

Equity Markets

US

U.S. equities sold off sharply on Friday, October 10, as renewed U.S.–China trade tensions rattled risk sentiment. The S&P 500 fell 2.7%, the Dow Jones lost 879 points, and the Nasdaq tumbled 3.6%, marking their steepest declines since April. The selloff followed President Trump’s threat of a “massive tariff hike” and potential cancellation of his meeting with China’s President Xi. Semiconductor stocks were hit hardest — AMD (-7.8%), Nvidia (-5%), and Qualcomm (-7.3%) — amid China’s new export curbs and an antitrust probe. The ongoing U.S. government shutdown (Day 10) added to uncertainty, delaying key economic data releases. For the week, the S&P 500 and Nasdaq lost over 1%, while the Dow dropped more than 2%.

UK:

The FTSE 100 declined 0.9% on Friday, retreating further from its record high of 9,549 (Oct 8) as weakness in miners and energy stocks offset gains in consumer shares. Renewed trade frictions weighed on sentiment following Trump’s tariff remarks. Entain (-4%), Mondi (-3.5%), Glencore (-3.2%), and Rightmove (-3.1%) led declines, while Shell and BP fell alongside oil prices. Defensive names like Admiral (+1.7%), Imperial Brands (+1.6%), and Unilever (+1.5%) provided modest support. For the week, the index shed ~0.7%.

EU:

European equities fell for a second consecutive session on Friday, with the Stoxx 50 and Stoxx 600 down ~1%, as optimism faded amid geopolitical easing in the Middle East and renewed U.S.–China tensions. Defense stocks led losses — Leonardo (-5.6%), Rheinmetall (-2.5%), Thales (-2.4%), and BAE Systems (-1.9%) — after Israel confirmed a ceasefire with Hamas at noon local time. Mining shares also declined, while Jyske Bank (+4%) bucked the trend on upbeat corporate results.

JPN:

The Nikkei 225 slipped 1.0% to 48,089, while the Topix lost 1.85%, as political turbulence and yen weakness unsettled investors. The Komeito party’s exit from the ruling coalition complicated Prime Minister-designate Sanae Takaichi’s policy path. Finance Minister Kato’s warning about “rapid FX movements” further dampened sentiment. Major decliners included SoftBank (-3.1%), Sony (-4%), and Toyota (-1.7%), while Fast Retailing (+6.7%) surged on record profits and upbeat FY2026 guidance.

Fixed Income

US:

The 10-year Treasury yield fell to 4.1% on Friday, reversing early-week gains as the government shutdown dragged into its 10th day. With official data delayed, traders turned to private indicators showing a softer labor market. Fed Governor Waller reaffirmed a cautious tone but noted that recent weakness supports additional rate cuts. Futures now price in a 25 bps cut at the October FOMC, with 83% odds of another in December.

UK:

The 10-year gilt yield was little changed at 4.72%, reflecting investor caution ahead of the November budget and concerns about fiscal sustainability. Finance Minister Rachel Reeves faces pressure to balance tax increases with growth support after raising employer contributions by £25 billion earlier this year. Markets currently expect the first BoE rate cut in April 2026, with only two reductions priced through year-end.

EU:

The French-German 10-year bond spread widened sharply early in the week following the French prime minister’s resignation, signaling rising political risk. Meanwhile, the German 10-year yield eased to 2.64%, its lowest since September, as investors sought safety. Over the past month, yields rose slightly (+1.7 bps), and remain up ~39 bps year-on-year.

JPN:

The 10-year JGB yield hovered just below 1.7%, near a 17-year high reached on October 8, as investors reassessed the BoJ’s policy stance amid political flux. The coalition split raised doubts about further fiscal stimulus, while a 3.5% yen slide since Takaichi’s win fueled inflation worries. Markets now price a potential BoJ rate hike on October 30, bolstered by wholesale prices up 2.7% YoY in September.

Commodities

• Gold:

  Spot gold surged past $4,000/oz, doubling from early 2024 levels, as investors sought refuge from currency volatility and fiscal uncertainty. Analysts warn the metal is 20% above its 200-day moving average, nearing overbought territory. Historically, such divergences — as in August 2020, March 2008, and May 2006 — preceded short-term peaks.

• Oil:

  WTI crude fell 4.2% to $58.20/bbl on Friday, its lowest since May, as escalating U.S.–China trade tensions and ample global supply weighed on demand expectations. The move was compounded by easing Middle East risk premiums following progress toward a Gaza ceasefire. Analysts highlight concentrated options hedging near $60, suggesting continued near-term volatility.

Foreign Exchange

U.S. Dollar:

The Bloomberg Dollar Index ended the week at 99.3, up nearly 2% weekly, its best gain in a year, supported by political instability in France and Japan. The U.S. government shutdown, now past 10 days, is delaying key economic releases — including CPI and labor data — leaving markets to rely on sentiment surveys. Traders see a 95% probability of a Fed rate cut this month and 80% for December.

GBP/USD

The sterling fell to $1.328, a 10-week low, under pressure from a stronger dollar and fiscal uncertainty ahead of the November 26 budget. Expectations of new tax hikes to meet fiscal targets have weighed on sentiment. Markets anticipate two BoE rate cuts in 2026, starting in April. Chief Economist Huw Pill reiterated the importance of “conservative central banking,” prioritizing inflation control over coordinated fiscal stimulus.

EUR/USD

The euro rebounded to $1.16 after touching a two-month low of $1.154 on Thursday, supported by reduced U.S. dollar demand following Trump’s trade comments. Political turmoil in France continues to cap upside momentum, though investors welcomed President Macron’s appointment of Roland Lescure as finance minister. The ECB’s September minutes reaffirmed that rates remain appropriately restrictive to manage two-sided risks.

YEN/USD

The yen weakened 1.6% on Monday after Sanae Takaichi’s pro-stimulus victory lifted fiscal expansion expectations and dampened near-term rate-hike bets. Both gold and Bitcoin hit record highs against the yen, reflecting Japan’s growing role in the global “debasement trade.”

Source: CNBC, Bloomberg, FTnews, TradingEconomics and Reuters.

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