Scepticism and fatigue surrounding artificial intelligence (AI), coupled with the ongoing US government shutdown and mounting concerns about the labour market, weighed on investor sentiment. The global technology sector declined, despite a steady stream of upbeat news related to AI. As the earnings season draws to a close, markets are now looking for supportive macroeconomic signals to restore confidence.
Market recap
Beyond the numbers
Macroeconomics
As revealed by the ISM-PMI, the global economy continues to be driven by services. Sentiment has improved, thanks to new technologies and increased consumption. Confidence in the manufacturing sector has improved less significantly.
In the eurozone, sentiment improved in both the service (with its index at 53) and manufacturing sectors (50). In the US, the divergence between falling ISM figures (48.7) and rising PMI indices (52.5) in the manufacturing sector continued, reflecting the different performances between small and large companies.
According to the ADP survey, employment in the US rebounded by 42,000, especially in services; however, other indicators pointed to ongoing fragilities in the labour market.
In the UK, besides the rebound in business confidence in both the service (52.3) and manufacturing sectors (49.7), the Bank of England (BoE) kept its interest rates on hold, but the decision was split 5:4. The BoE has adopted a wait-and-see approach ahead of the fiscal consolidation to be announced in the coming week.
In political news, the US Supreme Court has raised doubts about introducing tariff increases through executive orders.
This week, inflation in China is expected to remain low, and the monthly activity indicators should not reveal any significant changes to the underlying trend. The UK’s Q3 GDP is expected to show moderate growth of 0.2%, while employment is expected to continue its downward trend.
Asset allocation: strategic views as at November 2025
Equities
Global equities fell last week (MSCI ACWI total return -1.5%), as several factors weighed on sentiment, including scepticism and fatigue around AI, the ongoing US government shutdown, and concerns about the US labour market.
The global technology sector was hit hardest (-4.4%), with the Nasdaq (-3.0%) suffering its worst week since April. Despite continued positive technology/AI-related newsflow last week, stretched positioning, sentiment, and valuations left the sector vulnerable to profit-taking. Adding to the unease were comments from OpenAI suggesting the US government might need to backstop the ~USD 1.4 trillion in AI infrastructure deals the group has announced, though these remarks were later retracted.
This overshadowed strong earnings reports, with 91% of S&P 500 companies having reported Q3 results as of Friday. EPS growth for the quarter now stands at +15.0%, marking a fourth consecutive quarter of double-digit growth and far exceeding the +7.6% expected.
As earnings season wraps up, the focus is shifting back to macro factors before Nvidia publishes its results on 19 November. With major US indices at widely observed key technical support levels (50-day moving average), positive developments are needed to restore confidence after last week’s market wobble.
As earnings season wraps up, the focus is shifting back to macro factors
Fixed income
The risk-off mood in equities widened spreads, while rates remained largely unchanged in the US, and slightly up in Europe. This translated into timid returns for Treasuries (+0.2%), while investment grade (IG) was flat, and riskier credit (high-yield (HY), AT1s and emerging market (EM)) was down 0.3–0.4%.
During the week we had several central bank meetings, with the most important being the BoE which kept its rates on hold at 4% (on a 5:4 vote split). The minutes of the meeting showed a dovish tone, and inflation persistence was described as less pronounced with risks being ‘more balanced’. We continue to see GBP duration as attractive, expecting the differential between GBP and USD longer rates to narrow over the coming quarters.
The difference between corporate EM IG bonds and US IG bonds narrowed to only 6 bps – the tightest post-crisis level (excluding the peak due to the Covid-19 distortion). While the risk-off mood surely had an influence, US IG also saw record issuance of USD 158 billion in October (66% above the 4-year average), with Meta alone issuing USD 30 billion of debt.
The number of defaults and liability management exercises (LMEs) rose to a 12-month high in October, with three payment defaults (USD 2.1 billion in bonds and USD 1 billion in loans) and six distressed exchanges/LMEs (USD 2.5 billion + USD 2.5 billion). Still, this year there have been 51 defaults/LMEs (totalling USD 47.9 billion), which compares favourably with 70 last year (USD 62.9 billion). The default rate of bonds stands at 1.4% and loans at 3.3%, compared with the post-GFC average of 2.5%. The spread between the two has remained abnormally wide since 2024.
We continue to see value in GBP duration amid narrowing rate differentials
Forex & Commodities
Last week, the USD’s brief rally came to an end following the publication of the October Challenger jobs data, which showed a large rise in layoffs. The USD weakened further following reports that US politicians are moving towards a compromise to end the US government shutdown. There are few heavyweight data releases over the coming week, so markets will focus on Fed speakers (Bostic, Williams, Waller, Miran). Overall, we expect a rangebound performance in the coming week.
The GBP was flat following the BoE meeting, where it kept its rates on hold at 4%. The main event for the pound over the coming week will be the publication of ILO unemployment data. If the data show a deterioration in layoffs, it will weigh on sterling. We prefer to express short GBP positions against the EUR, where upside risks remain towards levels of above 0.88.
The AUD/USD rose modestly following the Reserve Bank of Australia’s (RBA) decision last week to keep its rates on hold at 3.60%. Markets are moving to price out further RBA rate cuts, though we note that the AUD is correlating more with risk assets than rate spreads, which explains why the AUD/USD is trading well below levels which are consistent with two-year spreads.
Gold rose from levels of USD 3,940 per oz to highs of around USD 4,070 per oz following the publication of the October Challenger labour market data. The USD’s modest depreciation also played a role. We maintain a constructive stance, expecting gold to rise to levels of USD 4,600 per oz by Q4 2026.
The USD is expected to remain rangebound in the coming week
The opinions expressed herein are correct as at 10 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.
