Market Commentary 3rd November 2025 – from Matt Taylor

UK housing and credit trends were mixed in September. House prices rose 0.3% in October, beating expectations but easing from September’s pace. Mortgage approvals climbed to their highest level in nine months, signalling resilience in housing demand, while remortgaging activity dipped slightly. Consumer credit growth moderated, with borrowing at its lowest since May, though annual growth edged higher. Meanwhile, mortgage rates continued to ease, with new lending rates falling to 4.19%, the lowest since early 2023.

FTSE 100 heavyweights HSBC and Shell delivered stronger-than-expected Q3 results last week, providing support to the index. HSBC reported profit before tax of $7.3 billion, ahead of forecasts despite a 14% year-on-year decline due to higher legal provisions. Shell posted adjusted earnings of $5.4 billion, beating consensus estimates, and announced a further $3.5 billion share buyback, marking its 16th consecutive quarter of significant shareholder returns. These results underscore the resilience of key sectors within the FTSE 100, helping offset broader market volatility.

Germany’s business sentiment improved in October, with the Ifo Business Climate Index rising and beating expectations. Sector trends were mixed: manufacturing and services saw improved expectations, while construction weakened. Consumer confidence deteriorated, with the GfK index falling to its lowest since April, as income expectations slumped amid inflation and job security concerns. Gross Domestic Product (GDP) stagnated in Q3, following a small contraction in Q2, while annual growth held at 0.3%. Inflation eased marginally to 2.3% in October, driven by lower energy and food prices, though core inflation remained elevated at 2.8%.

France’s economy outperformed expectations in Q3, expanding 0.5% quarter-on-quarter, the fastest pace since mid-2023, supported by strong exports and resilient domestic demand. Net trade contributed positively as exports surged 2.2%, while imports fell. Investment rebounded, particularly in capital goods and transport equipment, though household consumption was flat. On an annual basis, GDP grew 0.9%, the strongest in four quarters. Inflation cooled to 1% in October, below forecasts, as energy prices fell sharply and food inflation moderated, while services costs remained stable. Harmonised inflation also eased to 0.9%, reinforcing the disinflation trend.

The Federal Reserve lowered the federal funds rate by 25 basis points to a target range of 3.75%–4.00% at its October meeting, marking a second consecutive cut and bringing borrowing costs to their lowest level since 2022. Policymakers cited rising downside risks to employment even as inflation remains elevated. Two officials dissented, one favouring a larger cut and another preferring to hold rates steady, underscoring divisions within the committee. Chair Powell emphasized that a December cut is “not a foregone conclusion,” tempering market expectations for further easing. The Fed also announced plans to end its balance sheet reduction program on 1^st December.

US equity indexes ended the week mixed, with large-cap tech driving gains while smaller-cap stocks lagged. The Nasdaq outperformed on continued strength in AI-related names, though market breadth was narrow, as seven of 11 S&P 500 sectors declined. Earnings season accelerated, with 64% of S&P 500 companies reporting and 83% beating estimates. Reactions to the Magnificent Seven were mixed: Microsoft, Apple, and Meta fell post-results, while Amazon and Alphabet advanced. NVIDIA shares surged, briefly pushing its market cap above USD 5 trillion, a historic milestone.

Sentiment was supported by news of a temporary US-China trade truce, which included tariff reductions, suspension of export controls on rare earths, and renewed Chinese purchases of US agricultural goods. While the agreement offers short-term relief, it leaves room for future tensions.

Japan’s consumer confidence improved in October to its highest level since late 2024, with gains across all components including income expectations and employment outlook. The Bank of Japan kept its policy rate unchanged at 0.5%, maintaining its highest level since 2008, while reiterating readiness to tighten further if conditions warrant. Growth projections for financial year 2025 were revised slightly higher to 0.7%, supported by trade and policy developments, while inflation is expected to ease from 2.7% this year to 1.8% in financial year 2026.

China’s economic momentum weakened further in October as the official Manufacturing (Purchasing Managers’ Index) PMI fell, marking a seventh straight month of contraction and the lowest reading since April. Output and new orders declined, foreign sales dropped sharply, and price pressures eased, signalling persistent demand weakness. The Non-Manufacturing PMI held near stagnation, reflecting subdued activity in services amid property sector stress and global trade headwinds. While business confidence ticked up slightly on hopes of easing US trade tensions, overall sentiment remains fragile.

GBP / EUR – Current 1.1401 Previous 1.1451

The Pound weakened both against the Dollar (-1.19%) and the Euro (-0.44%) last week, pressured by growing expectations of Bank of England rate cuts.