Global markets in October 2025 reflected cautious optimism amid significant policy uncertainty and the approach of year-end central bank decisions. The IMF’s autumn update left global growth for 2025 unchanged at 3.1%, citing fading inflationary pressures, subdued global trade, and mixed signals from currency and commodity markets. Though equities broadly advanced, regional divergences became more pronounced due to divergent policy and cyclical strengths.
United States
U.S. economic data painted a picture of moderation but were clouded by an unprecedented data blackout resulting from the ongoing government shutdown. Core CPI inflation slowed to 3% in September 2025 from 3.1% in the previous two months, reflecting gradual progress against price pressures.
At the October 28–29 Federal Open Market Committee meeting, Federal Reserve delivered a widely expected quarter-point rate cut and announced plans to end its balance sheet drawdown on December 1. Chair Powell emphasized that another cut this year remains uncertain, noting internal divisions and the challenges of setting policy without essential government data. This reality has increased market volatility and forced industries to adjust their forecasts with limited guidance.
Amid these domestic challenges, President Trump held a high-profile meeting with President Xi, reportedly striking a deal: the US will lower tariffs on China in exchange for Beijing suspending rare earth export restrictions, resuming US soybean purchases, and tightening controls on the fentanyl trade.
Despite disruptions, equity markets proved resilient. The S&P 500 gained 3% in October, propelled by strong results in the technology and financial sectors. Individual corporate performances diverged: Alphabet rallied nearly 6% on robust Q3 earnings, while Meta fell 9% and Microsoft dropped 2%, reflecting differing AI adoption strategies and outlooks.
Safe-haven assets responded to uncertainty; gold prices rebounded to nearly $4,000 per ounce, supported by a spike in central bank buying. Q3 purchases totaled 220 tons, a 28% increase from the previous quarter, reversing an earlier slowdown, according to the World Gold Council.
Eurozone
Europe’s economy continued to show weak but positive momentum heading into the winter. October’s composite PMI hovered at 50.4 supported by services resilience but continued industrial softness, particularly in Germany. The eurozone’s headline inflation eased further to 2.2%, its lowest since mid‑2022. The European Central Bank, at its October meeting, interest rates unchanged for a third consecutive meeting, citing confidence in a resilient eurozone economy and an easing inflation outlook.
President Christine Lagarde warned that potential U.S. tariffs on European industrial goods remained “a material downside risk.” However, policymakers judged that premature easing could reignite price pressures, especially given higher wage settlements in France and Spain. Market participants expect an initial ECB rate cut in the first quarter of 2026 if current inflation trends continue.
European equity markets regained some ground, with the Euro Stoxx 50 up 2.8% for the month. Autos and luxury goods led gains on signs of recovering Chinese demand, partially offsetting weakness in industrial exporters. The euro briefly fell below 1.06 against the dollar before stabilizing, as investors balanced rate differentials with improved trade data.
United Kingdom
UK economic momentum stabilised, though headwinds remain. The annual inflation rate in the UK persisted at 3.8% in September, underpinned by wage growth and higher import costs stemming from ongoing trade frictions.
The Bank of England voted to keep interest rates unchanged at 4%. Differences within the Monetary Policy Committee widened as two members voted for an immediate cut, citing weakening credit growth and rising mortgage arrears. The committee stressed on a gradual, data-driven approach, with no pre-set path for rate cuts, keeping flexibility to respond to future developments.
Equities rose robustly with the FTSE 100 gaining nearly 4% in October, supported by defensive sectors and energy shares that benefited from a weaker pound. Sterling depreciated 0.8% against the dollar but held above recent lows, buoyed by stronger fiscal stability commentary from the Treasury. Bond markets steadied, with 10-year gilt yields around 4.45% after fiscal volatility earlier in the month.
China
China’s recovery narrative strengthened in October, though not uniformly. Industrial production jumped 6.5% year‑on‑year in September. This marked the fastest pace in industrial production since June, driven by faster growth in manufacturing activity, while retail sales growth moderated slightly to 3%. Consumer confidence improved as the government extended tax incentives for household electronics and EVs. Inflation remained near zero, highlighting subdued price pressures despite fiscal stimulus.
Financial markets reacted positively to continued policy support. The People’s Bank of China injected additional liquidity via MLF operations and hinted at lowering reserve requirements before year-end. Chinese equities rose 2.5% in October, lifted by state-backed technology firms and renewed optimism in the property sector after regulators eased mortgage restrictions in major cities. The yuan appreciated modestly, strengthening to 7.12 per dollar amid improving foreign inflows. However, high youth unemployment and lagging property completions remain persistent challenges.
Japan
Japan sustained its modest recovery trajectory through October. The Bank of Japan kept its short‑term policy rate at 0.5% and reaffirmed its commitment to continue raising borrowing costs if the economy follows its projections. The move came hours after the U.S. Federal Reserve delivered its second rate cut of the year, putting currency and bonds under renewed pressure. The yen weakened past 154 per dollar, hitting a nine-month low and government bonds rallied after Governor Kazuo Ueda acknowledged ongoing recovery but cautioned about risks from global trade tensions.
Japan’s annual inflation rose to 2.9%, suggesting steady price pressures as energy subsidies were phased out. Manufacturing PMI declined to 48.3 in October, its steepest decline since March 2024, marking the sharpest drop in factory orders in 20 months amid weaker customer demand and sluggish business conditions. Nevertheless, Japan equities soared, the Nikkei 225 broke new records above 52,000 points, primarily fueled by fervour in AI and tech stocks, though the broader Topix index lagged, suggesting the rally’s narrow sectoral focus
Overall
October’s markets were marked by guarded optimism facing unique challenges: the US government shutdown ushered in a historic data gap, complicating policy and investment decisions globally. Central banks proceeded cautiously, balancing inflation trends with persistent geopolitical and trade uncertainties. Equities mostly rallied, led by tech and AI across developed markets and a cyclical rebound in China, but narrow market breadth and unresolved political risks signal that volatility and selective positioning may persist as 2025 closes. As always, diversification and careful analysis remain crucial for investors navigating these dynamic market conditions.
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Disclaimer
This market review is provided for informational purposes only and does not constitute investment advice, an offer, or a solicitation to buy or sell any financial instrument. The information herein is based on sources believed to be reliable as of the date of publication but may be subject to change without notice. Past performance is not a reliable indicator of future results, and all investments carry risk. Readers should seek independent professional advice before making any investment decisions.
Data and market insights referenced in this report were compiled from publicly available sources, including the International Monetary Fund (IMF), World Bank, Federal Reserve, European Central Bank (ECB), Bank of England (BoE), People’s Bank of China (PBoC), Bank of Japan (BoJ), World Gold Council, Bloomberg, Reuters, Financial Times, and selected macroeconomic publications from J.P. Morgan, Goldman Sachs, and Morgan Stanley.
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