2025 Weekly Update

Market update

The S&P 500 closed the week at 6,840.2, +0.71% higher. The Dow Jones closed at 47,562.87, +0.75%, with the Nasdaq higher by +2.24%. The volatility index VIX closed the week at 17.44, up from 16.37. The Euro Stoxx 600 fell -0.67%.

The 10-year UST closed at 4.08%, up from 4% a week before. The yield curve is upward sloping with the yield spread between the 3-month and 10-year UST at 25bps. US Corporate Bond spreads: Investment Grade spreads remained unchanged at 79bps and High Yield spreads narrowed -13bps at 342bps. German 10-year Bunds yield remained unchanged at 2.63%. In Europe, Corporate Investment Grade spreads narrowed -5bps at 85bps and High Yield narrowed -16bps at 303bps. 

The US Dollar Index (DXY) appreciated +0.86% last week and closed at 99.8. The Euro closed at 1.1537 (-0.77%); the Yen depreciated -0.74%, closing at 153.99 and the Swiss Franc depreciated -1.12%, closing at 0.8046. Gold closed at $4.002.92, depreciating -2.68%. Oil was lower, Brent closed at $65.07 (-1.32%) and WTI at $60.98 (-0.85%).

Macroeconomy

FOMC meeting

The FOMC cut the fed funds rate by 25bps to 3.75-4.00%, with Kansas Fed President Schmid dissenting in favor of keeping rates steady while Governor Miran favored a 50bps cut. While the decision itself was widely expected, Chair Powell was more equivocal on future rate cuts, saying that “A further reduction in the policy rate at the December meeting is not a foregone conclusion, far from it”. Powell acknowledged “strongly differing views" within the FOMC, with some primarily concerned about a slowing labor market but others warning that still elevated inflation limited room for further easing. Fed funds futures cut back the likelihood of a 25bps Dec. rate cut from effectively fully priced down to 68%. Investors are more cautious about a potential rate cut as we have seen a strongly divided committee with different economic outlooks and varying levels of risk tolerance, the need for caution amid economic uncertainty and proximity to the neutral rate. Additionally, Bessent confirmed the final five candidates for Fed Chair: Kevin Hassett, Kevin Warsh, Christopher Waller, Michelle Bowman and Rick Rieder. He plans to submit the shortlist to Trump after Thanksgiving. However, Trump responded that he was thinking about Bessent himself for the Fed Chair job, as well as Secretary of State Marco Rubio and US Trade Representative Jamieson Greer.

US-China agreement

The US and China have decided to extend the trade truce by another full year, with a 10% reduction of fentanyl tariffs on Chinese goods: 1) one-year truce on the expanded export restrictions towards Chinese companies from the US side and the rare earth export restrictions from the Chinese side; 2) the additional port fees imposed by both sides will be postponed for one year as well; 3) China promises to resume purchasing US soybeans; and 4) China promises to put more efforts to control fentanyl-related chemicals. Most elements of the agreement are a rollback of the recent escalation by both countries, but the reduction of fentanyl tariffs was net positive. In general, US-China tensions are here to stay ad high-end chips and Taiwan are left out the discussion this time, but these issues will likely come back to the conversation in future rounds of negotiations.

US data

An ADP report showed a weekly average gain of 14,250 private-sector jobs in the four weeks to October 11, so translating to a +57k monthly pace—which would represent some stabilization after recent slowing in the ADP jobs series. Notably, ADP will now publish weekly preliminary job estimates, offering a more high-frequency lens on labor market dynamics. Meanwhile, the FHFA house price index rose +0.4% m-o-m, its strongest monthly print since last year, while the Conference Board’s Consumer Confidence index came in at 94.6 (vs 93.4 expected), though still a point below the prior month’s upwardly revised figure. The Dallas Fed Manufacturing Activity Index came in at -5.0, better than expectations of -6.2.

ECB on hold

The European Central Bank (ECB) held rates steady at 2% for the third consecutive meeting, citing mixed signals on growth and inflation. President Christine Lagarde reiterated that policy is “in a good place”, though she emphasized it is “not a fixed place”, and the ECB will act as needed to maintain stability. While there were no material surprises, the ECB seemed a little more confident about growth amid all the uncertainties, continuing a trend of increasingly less dovish statements. Market expectations for ECB rate cuts remain muted, with just 11.6bps of cuts priced by next Sept.

Euro data

Euro area GDP growth slightly outperformed expectations, recording a +0.2% q-o-q increase in Q3, up from +0.1% in Q2. The upside surprise was primarily driven by France, the Netherlands and Portugal. Country-wise, German and Italian, GDP stagnated in Q3. French GDP surprised to the upside posting a strong 0.5% q-o-q in Q3 due to net exports. Spain continued to outperform its peers posting a strong +0.6% q-o-q, thanks to a robust domestic demand. Also, tThe European Commission’s survey aligned with the messages from PMIs and national surveys indicating that euro area activity is gaining momentum at the start of Q4. The ESI rose to 96.8 points in October, up from an upwardly revised 95.6 in September. The improvement was broad based across sectors and countries. In Germany, IFO Business Climate survey also beat expectations slightly (88.4 vs. 88.0). That was driven by business expectations (91.6 from 89.7) improving to their highest level since February 2022, though the current situation assessment deteriorated (85.3 vs. 86.0) to an 8-month low. So, the recent pattern of greater optimism about the future, but little improvement in the present continued. Encouragingly, it is IFO expectations that tend to have the better predictive power for growth. Still, headwinds remain, including the impact of the second “China shock” on German manufacturing.

UK BoE

Markets expect the Bank of England (BoE) to remain on hold in the upcoming meeting this coming Thursday, leaving the policy rate at 4%. Since summer, the Bank’s guidance has leaned hawkish, reflecting concerns over inflationary pressures and the risk of second-round effects on wage dynamics, signallingsignaling reluctance to cut rates again this year. However, recent data has been notably dovish, with further evidence of a disinflationary trend and a loosening labourlabor market, reigniting discussions about a potential rate cut in Q4. The “gradual and careful” guidance is expected to remain unchanged.

BoJ & data

The Bank of Japan (BOJ) kept interest rates steady at 0.5% as anticipated, with two members dissenting in favor of a rate increase. This extends the pause in its tightening cycle to a sixth consecutive meeting after a 25bps hike in January. In its quarterly economic outlook report, the board slightly adjusted its economic growth forecast for the current fiscal year ending in March 2026 to 0.7% from 0.6%, while maintaining its projections for the subsequent two fiscal years at 0.7% and 1% respectively. Additionally, it raised its inflation forecast for fiscal 2026. Simultaneously, the central bank anticipates that underlying inflation will reach 2% in the latter half of the three-year projection period ending in March 2027, retaining the language from the previous report issued in July. Regarding data, Tokyo’s core CPI increased by 2.8% in October, surpassing expectations (2.6%) and underscoring ongoing inflationary pressures. Ueda seemed to place more emphasis on monitoring things like progress on the next spring Shinto wage negotiations and how the economy was dealing with tariff uncertainty. Also, factory output in September rose by 2.2% from the previous month, exceeding market forecasts of a 1.5% increase, while retail sales showed a modest y-o-y rebound of 0.5%, compared to the expected 0.7%, indicating fragile domestic demand. Additionally, Japan’s unemployment rate unexpectedly remained stable at 2.6% in Sept. (expectations at 2.5%).

Highlights

On rates

Treasury yields rose across maturities following an eventful week marked by the FOMC meeting on Wednesday and impactful remarks by Fed Chair Powell. The 2-year Treasury yield increased by 9.2bps to 3.57%, the 10-year yield rose by 7.5bps to 4.07%, and the 30-year yield climbed by 5.8bps to 4.65%. These movements were driven by the Federal Reserve’s decision to cut the federal funds rate by 25bps and the Fed’s commentaries. In Europe, the European Central Bank (ECB) held rates steady at 2% for the third consecutive meeting. European bonds experienced mixed movements, with 10-year Bund yields rising by 0.7bps, while OATs and BTPs declined by 1.1bps and 3.2bps, respectively. Elsewhere, the Bank of Canada cut rates by 25bps, while the Bank of Japan maintained its rate at 0.5%. Looking ahead, no major changes are expected in this week’s central bank meetings, which include the RBA on Tuesday, the Riksbank on Wednesday, and the Norges Bank and Bank of England (BoE) on Thursday.

Earnings

With the busiest week of Q3 earnings—particularly for the Technology sector—now behind us, 64% of S&P 500 companies. Of these, 83% have posted positive EPS surprises, and 79% have reported positive revenue surprises in the US. The blended y-o-y earnings growth rate for the S&P 500 stands at 10.7%. If this holds, it will mark the 4th consecutive quarter of double-digit earnings growth, a first since 2021. At the sector level, Information Technology, Utilities, Financials, and Materials are reporting double-digit earnings growth for the quarter. Last week, mega-cap tech earnings revealed strong revenue and earnings momentum, though CapeEx exceeded expectations, leading to some market pushback. Meta faced criticism over its capex and capex outlook, while Oracle shares have struggled due to concerns about its data center expansion plans. The Information Technology sector has been the second-largest contributor to the S&P 500’s earnings growth since September 30, with positive EPS surprises from Microsoft ($4.13 vs. $3.67), Apple ($1.85 vs. $1.78), and Intel ($0.23 vs. $0.02). The sector’s blended earnings growth rate has risen to 25.6% from 20.9% during this period. Looking ahead, several U.S. tech firms are in focus, including Palantir (Monday) and AMD (Tuesday). Other notable S&P 500 companies reporting include McDonald’s, Uber, and Pfizer. In Europe, 53% of the Stoxx600 have reported results. EPS beats are at 56%, surprising positively by 2%. Stoxx Europe 600 Q3 EPS is improving, with earnings upgrade breadth continuing to strengthen. This week, the spotlight will be on the automotive and healthcare sectors, with Ferrari reporting on Tuesday, followed by BMW, Novo Nordisk, and Siemens Healthineers on Wednesday, and AstraZeneca on Thursday. Energy firms like Saudi Aramco, ConocoPhillips, and BP, alongside European defense with Rheinmetall and Leonardo.

What to watch

• Monday: US ISM Manufacturing; Switzerland PMI; Manufacturing PMI for Asian Countries
• Tuesday: UUS JOLTS Job Report, Durable Goods Orders; Australia RBA Cash Rate
• Wednesday: US ADP Employment and ISM Services; Germany Factory Orders; Sweden's Riksbank Policy Rate; Eurozone PPI
• Thursday: US Challenger Job Cuts and Initial Jobless Claims; Bank of England Bank Rate; Norway's Deposit Rates; Eurozone Retail Sales; Japan Cash Earnings
• Friday: US Nonfarm Payrolls, University of Michigan Survey; China and Taiwan Exports

*Most US federal data releases are expected to be delayed due to Government Shutdown