The Fed's 25-bp rate cut, paired with Powell's cautious tone on further rate reductions, led to mixed market reactions. Despite this, strong earnings, particularly in the tech sector, supported equities, while bond yields rose. The USD strengthened amid JPY weakness, and gold consolidated at around USD 4,000. With the eurozone showing modest growth and US consumer confidence declining, investors are focused on another heavy week of earnings and key data releases for further direction.
Market recap
Beyond the numbers
Macroeconomics
As expected, the Fed lowered its key rate by 25 basis points last week (to 3.75–4.0%). However, the surprise came from Powell's hawkish tone, as he stated that a rate cut in December was uncertain. More positively, he announced the end of quantitative tightening (QT) and more active liquidity management. As expected, the European Central Bank (ECB) and Bank of Japan (BoJ) left their key rates unchanged.
Preliminary estimates of Q3 GDP for the eurozone came as a surprise, with growth of 0.2%. Germany and Italy saw no growth, but France and Spain posted rebounds of 0.5% and 0.6%, respectively, thanks to dynamic investment.
In the United States, consumer confidence (Conference Board Index) fell again due to employment concerns, but confidence remained strong in industry.
The meeting between Trump and Xi eased tensions over rare earths, maritime trade, and soybeans. However, no major agreements were reached between the two powers, and the trade truce was extended for another year.
This week, the Bank of England (BoE) will face pressure to ease its rates, as labour data has weakened and inflation remained limited in September (3.8% y/y); nevertheless, the BoE’s Monetary Policy Committee could remain highly divided on inflation and risks. Other central bank meetings are also scheduled to take place for Sweden, Australia, Brazil, Poland, Malaysia, Mexico, and Norway. In the US, the Institute for Supply Management’s (ISM) Purchasing Managers Index (PMI) report should be delivered and labour surveys (ADP, JOLTS) could shed light on current trends.
Asset allocation: strategic views as at November 2025
Equities
Global equities registered modest gains last week (MSCI ACWI total return +0.5%) amid several cross-currents: geopolitical developments (US trade news flow with South Korea and China), central bank rate decisions (Federal Reserve, ECB, BoJ), and a flurry of earnings reports (35% of S&P 500 companies), including five of the Magnificent 7 (+3.3% over the week).
Strength was once again led by the global technology sector (+3.2%), supporting the outperformance of US equities (S&P 500 +0.7%, Nasdaq +2.3%), as corporate reporting indicated continued AI infrastructure-related spending. However, investors are increasingly questioning when these investments will yield returns. While Alphabet, Amazon, and Apple beat expectations, Meta and Microsoft fell short.
With 64% of S&P 500 companies now having reported Q3 results, the quarterly EPS growth rate sits at +10.7% (vs. the +7.9% expected), marking the fourth consecutive quarter of double-digit growth and supporting extended valuations (S&P 500 forward P/E 22.8x).
Looking ahead, another major week of earnings reports (27% of S&P 500 companies) awaits investors. While the overall backdrop for equities remains supportive, short-term market consolidation cannot be ruled out, as mega-cap tech catalysts have now passed.
Earnings strength supports equities, though near-term consolidation remains possible
Fixed income
The yield on the US 10-year Treasury note rose unexpectedly mid-week, ending at around 4.08% (+10 bps), after markets digested Jerome Powell’s unusually blunt remarks that, ‘…a further reduction in the policy rate at the December meeting is not a foregone conclusion – far from it.’
Although this move pushed most rate-sensitive assets into negative territory, yields remain lower on the month, supporting another round of positive returns: investment grade (IG) +0.4%, high-yield (HY) +0.3%, AT1 +0.5%, and emerging market (EM) +2.1%, with the last of these boosted by a strong rally in Argentine bonds following Milei’s decisive victory in the mid-term elections.
Following last week’s 25-bp rate cut, and despite Powell’s cautious tone, markets are now pricing in a 67% probability of another cut in December.
In Europe, the ECB meeting unfolded as expected, with policy rates kept unchanged at 2%. The central bank noted that the eurozone remains in a favourable position regarding inflation and growth. Meanwhile, French 10-year OAT yields have stabilised at around 3.53%, as political uncertainty is partly offset by signs of compromise by the Socialist Party on the budget front and by the French central bank governor’s openness to further rate cuts.
Looking ahead, markets will focus on the Bank of England’s policy meeting on Thursday, with derivatives implying a 30% probability of a rate cut. Attention will also turn to US funding for markets after recent signs of stress in the repo market – month-end volumes exceeded USD 30 billion – which may prompt the Fed to bring the end of quantitative tightening forwards (it is currently scheduled for 1 December).
Powell’s cautious tone pushed yields higher, but markets still expect another Fed cut in December
Forex & Commodities
Last week, the USD edged higher against most major G10 currencies, with the US Dollar Index rising to around 99.00. The Federal Reserve cut its Fed Funds rate by 25 bps, taking it to 4.00%, and indicated that its quantitative tightening programme will end in December. Fed Chair Powell noted that a December rate cut was ‘not a done deal’, which pushed short-term US yields higher.
The coming week brings several event risks, including the publication of JOLTS, ADP, and ISM data. We expect USD consolidation to continue through the end of Q4.
The USD/CNY saw limited moves following the Trump–Xi meeting, which effectively postponed any escalation in the trade war for another 12 months. We note that the People’s Bank of China (PBoC) continues to guide the USD/CNY towards lower levels.
The JPY weakened as the BoJ left rates on hold at 0.50% and issued a neutral statement. Markets moved to price out expectations of a December rate cut, which is now below 50%. The JPY is likely to maintain a weak bias in the near term, and investors should expect ongoing verbal interventions – which have already occurred to a minor degree – from Japan’s Ministry of Finance.
The GBP continued to weaken against both the EUR and the USD, as markets increased bets on BoE rate cuts. We think it is possibly too early for the BoE to cut rates this week; however, markets are likely to price in a December cut. The combination of higher taxation in the forthcoming budget and falling inflation should give the BoE the room it needs to lower rates below current terminal expectations.
Gold consolidated at around USD 4,000 per oz, and ETF inflows have stabilised, possibly pointing to a more range-bound environment in the coming weeks. We maintain our guidance for a year-end level of USD 4,000 per oz.
Rate differentials support the USD, while gold is holding firm at USD 4,000 in a range-bound market
The opinions expressed herein are correct as at 3 November 2025 and are subject to change without notice. This information should not be relied upon by the reader as research or investment advice regarding any particular fund, strategy or security. Past performance is not a guide to current or future results. Any forecast, projection or target, where provided, is indicative only and is not guaranteed in any way.
