Weekly market commentary

Market review

Markets have been volatile, driven largely by a mix of geopolitical tensions and macroeconomic uncertainty. In response to China tightening export rules on rare earth materials, President Trump reignited tariff threats, proposing 100% levies on all Chinese imports. The announcement triggered a sharp market reaction, with the S&P 500 falling 2.7%, its worst single-day performance since April’s “Liberation Day.” Bond yields declined in sympathy, with the US 10-year yield settling marginally above 4%, a level it has not crossed since the same period in April. However, subsequent conciliatory remarks from Trump and Treasury Secretary Bessent helped calm investor nerves, allowing the index to rebound 1.56% on Tuesday.

UK macro data was mixed this week. Unemployment ticked up to its highest level since 2021, while wage growth showed signs of slowing, both developments increasing expectations for BoE rate cuts. The UK economy returned to growth, with GDP rising by 0.1% in August, in line with expectations. However, the picture was less encouraging beneath the surface, as July’s figure was revised down from 0.0% to -0.1%, softening the momentum implied by the headline print. With the Autumn Budget approaching, continued fiscal pressure and fragile growth dynamics may constrain the government’s room to manoeuvre within their non-negotiable fiscal rules.

In the US, the government shutdown continues to delay key economic data releases, including September’s inflation print, now expected on 24 October. In the absence of official figures, investors are relying on private sources like the ADP employment report, which showed a 32,000 job decline last month. Meanwhile, US equities have come under pressure following losses, write-downs, and legal proceedings at two regional banks, which is being linked to borrower fraud, which has further supported US yields in their decline towards 4%.

Outlook

Whilst markets remain reactive to a mix of economic and geopolitical signals, investors seem largely undeterred and are continually buying into short term softness. As the Q3 earning season gets underway, investor attention is shifting back to corporate results, which are a key focus amid growing caution across markets. As inflation trends diverge and labour markets evolve, central banks may take increasingly different paths - raising the potential for greater dispersion across asset classes and regions in the period ahead.

Movers table