Market Commentary 10th November 2025 – from Naigil Johnson

The Bank of England’s Monetary Policy Committee voted 5–4 to hold the Bank Rate at 4% at its meeting last Wednesday. The MPC noted that headline inflation has peaked and underlying disinflation is advancing, supported by softer wage growth, easing services inflation, and a cooling labour market. Policymakers judged that risks to achieving the 2% inflation target are now more balanced, with inflation persistence less of a concern and downside risks from weak demand gaining importance.

The latest S&P Global UK Composite Purchasing Managers’ Index (PMI) indicated a renewed expansion in private sector activity during October, with growth in services outweighing a modest contraction in manufacturing. The PMI, which measures the health of business activity, showed that firms experienced stronger demand and improved confidence despite persistent headwinds from high borrowing costs, trade tariffs, and fiscal uncertainty ahead of the November Budget. The upturn appeared to suggest that while the economy remains subdued, underlying momentum in the services sector continues to provide some support.

UK house prices rose further, with the Halifax House Price Index reporting a strong growth of 1.9% year-on-year in October 2025. The average property value climbed to a record £299,862, as limited supply and improving buyer sentiment underpinned prices.

Germany’s private sector activity strengthened in October, marking the fastest pace of expansion since mid-2023. The latest HCOB Germany Composite PMI showed a solid improvement, with services activity expanding more rapidly and manufacturing output contracting at a slower rate. New business rose at the steepest pace in over two years, supported by resilient domestic demand, even as export orders softened slightly. The results appeared to suggest that Europe’s largest economy is regaining some momentum, helped by stabilising energy prices and improving confidence among service providers.

In contrast, France’s private sector activity continued to contract in October, extending a downturn that has now lasted over a year. The HCOB France Composite PMI indicated further weakness across both services and manufacturing, reflecting subdued demand and persistent cost pressures. Although the pace of decline eased slightly from the preliminary estimate, the data appears to suggest an economy that is still struggling to gain traction amid soft domestic demand and weak export performance.

Germany’s trade surplus narrowed in September to its lowest level in nearly a year, as imports rebounded strongly. Purchases from non-euro area European countries and major trading partners such as China, the US, and the UK increased sharply, reflecting improving domestic and industrial demand. Exports, meanwhile, grew at a slower pace, suggesting that while the external environment remains supportive, domestic factors are beginning to play a larger role in driving trade flows.

France’s trade balance deteriorated in September, with the deficit widening to its largest in three months. Exports were broadly flat as gains in refined petroleum products, mechanical equipment, and agricultural goods were offset by lower shipments of transport equipment and natural hydrocarbons. The figures appeared to suggest challenges faced by French exporters amid soft global demand and a sluggish domestic manufacturing base, reinforcing concerns about the economy’s near-term growth outlook.

US manufacturing activity weakened further in October, with the sector remaining in contraction for the eighth consecutive month. The latest ISM Manufacturing PMI signalled a broad-based slowdown, as production and new orders declined and employment continued to fall, reflecting firms’ cautious approach to hiring. Inventories and backlogs also contracted, underscoring subdued demand conditions. In contrast, the ISM Services PMI pointed to a stronger expansion in the services sector, marking its most robust performance since February. Business activity and new orders rebounded sharply, although hiring continued to contract, which appeared to suggest service providers remain wary about the sustainability of the recovery.

US consumer confidence fell sharply in early November, according to preliminary data from the University of Michigan’s survey. The data appeared to suggest that households grew increasingly anxious about the economic fallout from the prolonged government shutdown. Sentiment dropped to one of its lowest levels on record, with perceptions of current financial conditions hitting an all-time low and expectations for future business conditions also deteriorating. The decline suggests rising public concern over household finances and economic stability, which could weigh on consumer spending in the months ahead.

The Bank of Japan left its benchmark short-term interest rate unchanged at 0.5% in October, maintaining borrowing costs at their highest level since 2008. The decision, approved by a 7–2 vote, was widely expected by markets as policymakers opted to extend their pause following January’s rate hike.

China’s private sector growth eased in October, according to the latest RatingDog General Composite PMI, which continued to signal expansion but at a slower pace. Both manufacturing and services activity grew more moderately, reflecting weaker domestic and external demand. New orders rose at a softer rate, weighed down by renewed declines in export sales, as global trade conditions remained subdued.

In comparison, Japan’s private sector continued to expand modestly in October, as indicated by the latest S&P Global Composite PMI. The services sector remained the main driver of growth, while manufacturing activity contracted further. Overall output and new business increased, though at a slower pace, with new orders declining for the first time since mid-2024 due to weaker demand in manufacturing and more subdued sales growth in services.

China’s trade surplus narrowed in October to its smallest level since February, as exports fell unexpectedly while imports rose. Overseas shipments declined year-on-year following several months of front-loaded orders aimed at avoiding new US tariffs, while import growth was supported by stronger domestic demand and higher commodity purchases. The weaker export performance appeared to highlight the ongoing drag from global trade tensions and slowing external demand, even as domestic consumption shows tentative signs of recovery.

GBP / EUR – Current 1.1380 Previous 1.1401

The Pound edged higher against the Dollar (+0.08%) but slipped versus the Euro (-0.18%) last week. Before Friday’s modest gains, the Pound was on track for a third consecutive weekly decline against both currencies, as investors digested the Bank of England’s rate decision and looked ahead to the government’s budget later this month.