Weekly Market Recap

The UK

UK unemployment fell unexpectedly to 4.7% in August, down from the 4.9% registered in July. Inflation rose to 3.5% in September, higher than expected and its highest level since last October. Transport contributed significantly to the rise, mainly due to higher motor fuel prices. The data helped strengthen expectations that the Bank of England’s Monetary Policy Committee could raise interest rates at its next meeting on 5 November.

Signs suggest UK consumers feel under pressure, with the GfK Consumer Confidence Index dropping sharply to -24 in October from -13 the previous month. This was the largest monthly fall in sentiment since the pandemic and was attributed to higher energy and borrowing costs, as well as uncertainty around this week's autumn Budget.

Europe

Cost-of-living protests turned into widespread riots and looting in major French cities last week, contributing to a sell-off in French equities and bonds. The yield on the government’s 10-year bonds, for example, rose to more than 5%, resulting in the widest yield spread since 2012 versus German bunds of equivalent maturity.

Third-quarter earnings season continued to gain momentum during the week. Some energy companies reported surging profits while others issued upbeat updates on commodity trading operations ahead of official results. In contrast, some luxury goods earnings disappointed. Semiconductor companies’ results appeared to be fundamentally solid, but their shares were volatile amid a midweek global sell-off in technology stocks.

The S&P Global Flash Eurozone Composite PMI Output Index indicated that eurozone growth slowed in October. PMI fell to 51.9 in October from 53.1 in September. This preliminary reading was weaker than a consensus estimate of 52.7.

The European Central Bank released its consumer survey, which showed inflation expectations among eurozone households rose in September. Respondents said they expected prices to rise by 3.1% over the next 12 months, up from 3.0% in August.

China

China's gross domestic product (GDP) grew 4.5% YoY in the third quarter, up from 4.3% in the second quarter and ahead of the 4.4% median forecast in a Reuters poll. According to the National Bureau of Statistics, September industrial production rose 5.5% YoY, and retail sales rose 1.1%, while fixed asset investment (excluding rural households) fell 7.2% over the first nine months compared with the same period last year. GDP increased 4.6% YoY in the first three quarters, leaving the government's 4.5% to 5.0% annual growth target within reach. The stronger headline GDP reading may reduce the urgency for broad-based stimulus, although subdued consumption and weak investment point to uneven domestic demand.

People's Bank of China (PBoC) Governor Pan Gongsheng said on Monday that the central bank was studying whether to make the overnight reverse repurchase rate, rather than the seven-day rate, its main policy benchmark to improve monetary policy transmission. No such change has been implemented. Separately, China's one-year and five-year loan prime rates were left unchanged at 3.00% and 3.50%, respectively, in line with expectations.

China's State Administration for Market Regulation said on Wednesday that it met with representatives from online platforms, including Taotian, JD.com, Pinduoduo, and Kuaishou, to discuss product quality and consumer protection. While acknowledging improvements following guidance issued in 2025, the regulator cited continuing concerns about counterfeit products, misleading advertising, and product descriptions, particularly in livestream commerce and instant retail. Hong Kong-listed e-commerce shares declined on Thursday amid the announcement and a broader technology sell-off. The statement did not specify new enforcement actions.

The US Treasury Department proposed updates on Thursday to rules governing certain US investments in sensitive technologies in countries of concern, including China. The proposed requirements would broaden the scope of transactions subject to notification or prohibition, adding specified biotechnology activities alongside areas such as advanced semiconductors and AI. Several Hong Kong-listed biotechnology shares fell on Friday, although the implications for individual companies and cross-border financing remain uncertain. The proposal is subject to public consultation and has not taken effect.

Japan

The yield on the 10-year Japanese government bond (JGB) fell to 2.80% from 2.92% at the end of the previous week. Bond prices rose as investors moved into lower-risk assets after the global equity sell-off, which also contributed to a rally in US government bonds. Demand for longer-dated JGBs strengthened considerably, with demand at a 20-year bond auction reaching a record, a result attributed to higher yields and demand for safer assets. Japan’s nationwide core consumer price index, excluding fresh food, rose 2.1% year over year (YoY) in September, up from 1.7% in August and marking the first reading above the Bank of Japan's (BoJ) 2% target since December 2025. This supported expectations of further rate increases, although the BoJ is reportedly favouring leaving rates unchanged at its 29 to 30 October meeting.

The yen appreciated over the week, trading JPY 156.9 against the US dollar on Friday, up from the prior week’s JPY 158.0. The currency moved out of the narrow range it held for several weeks as risk aversion supported demand for the yen. US Treasury yields fell sharply, and the dollar weakened broadly, narrowing the expected interest rate differential between the US and Japan.

Elsewhere, Japan’s exports rose 16.7% YoY in September, below the 21.3% consensus and slower than the 19.3% increase in August, marking the weakest growth since April, although chip-related products and autos remained supportive. Imports rose 18.9%, also below the 20.4% consensus and slower than the 28.0% increase in August.

Australia

Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser said on Wednesday that Australia's inflation outlook looked "materially worse" than the RBA's August forecast, citing higher AI and technology prices feeding through to consumer price inflation, as well as persistent domestic pressures. Hauser warned that the RBA cannot allow inflation expectations to drift away from target, signalling a possible fifth rate hike at the 2-3 November meeting. The Australian flash composite output PMI for October was weak, suggesting downside risks to near-term GDP growth.

Canada

At the Bank of Canada's (BoC) 28 October rate decision, the debate sharpened after Monday's Consumer Price Index (CPI) print showed headline inflation edging up to 3.1% in September — driven by a 27.8% annual surge in gasoline prices — while core measures came in softer than expected, initially bolstering the case for a hold. However, the BoC's simultaneous release of its third-quarter Business Outlook and Consumer Expectations surveys, which showed rising inflation expectations and firms planning to pass on higher input costs amid ongoing US trade tensions, shifted market sentiment, pushing consensus towards a 25bps increase to 2.5%. The Parliamentary Budget Office added to the cautious macro backdrop, cutting its 2026 GDP growth forecast to 0.9% (from 1.1%) and flagging higher federal debt as US tariffs and Canadian retaliatory measures weigh on the economy.