2025 Weekly Update

Market update

The S&P 500 closed the week at 6,734.11, +0.08% higher. The Dow Jones closed at 47,147.48, +0.34%, with the Nasdaq lower by -0.45%. The volatility index VIX closed the week at 19.83, up from 19.08. The Euro Stoxx 600 rose +1.77%.

The 10-year UST closed at 4.15%, up from 4.1% a week before. The yield curve is upward sloping with the yield spread between the 3-month and 10-year UST at 26bps. US Corporate Bond spreads: Investment Grade spreads widened +1bp at 84bps and High Yield spreads narrowed -7bps at 352bps. German 10-year Bunds yield closed at 2.72% up from 2.67% a week before. In Europe, Corporate Investment Grade spreads widened +1bp at 92bps and High Yield narrowed -1bp at 312bps. 

The US Dollar Index (DXY) depreciated -0.31% last week and closed at 99.3. The Euro closed at 1.1621 (+0.48%); the Yen depreciated -0.74%, closing at 154.55 and the Swiss Franc appreciated +1.39%, closing at 0.794. Gold closed at $4,084.06, appreciating +2.07%. Oil was higher, Brent closed at $64.39 (+1.19%) and WTI at $60.09 (+0.57%).

Macroeconomy

Govt. shutdown

Congress passed a full year budget for three departments, while funding other agencies through January 30, 2026. The bill includes pay for furloughed government workers and recalling government employees who were laid off during the shutdown. Following the reopening, markets expect getting the missed data for September (with Sept. NFP likely to be released this week) as these data were close to being ready. The October data will probably take a few weeks to be collected and released and possibly skipped/released together with the November data. Data quality likely damaged given the lack of any collection during the shutdown. CPI is the most at risk, followed by the household survey and then the establishment survey. The longest government shutdown would reduce Q4 GDP by 1.5% in Q4, and boost Q1 GDP by 2.2%, according to CBO estimates. It will be difficult to tease out in (less reliable) data how much is a temporary effect due to lost spending in the shutdown (furloughed workers, food stamps), and how much is genuine economic weakness. Beyond jobs, several delayed releases will inform Q3 US GDP estimates: August construction spending (Monday), factory orders (Tuesday), and the trade balance (Wednesday). Earlier data suggested 2.8% annualized growth for Q3 GDP, but this week’s numbers could tilt forecasts higher. More timely indicators include the Empire State manufacturing index (Monday), NAHB housing market index (Tuesday), Philadelphia Fed survey and October existing home sales (both Thursday). Consumer sentiment from the University of Michigan rounds out Friday, with inflation expectations within that survey remain a key watchpoint for policymakers.

Tariffs

The United States has agreed to lower its 39% tariff on Swiss goods to 15%, according to a statement published by the White House. The development marks a de-escalation of one of the sharpest trade disputes between the two countries in decades. The initial 39% tariff, announced on 1 August, was justified by Washington as necessary to address Switzerland’s USD 39 billion goods-trade deficit, which the Trump administration deemed a national emergency. The agreement, which aligns Swiss tariffs with those applied to the European Union, provides a welcome reprieve for Swiss exporters and signals a more constructive phase in US–Swiss trade relations. In return, Switzerland has agreed to invest USD 200 billion in the US. Also, Treasury Secretary Bessent said that the US will announce tariff relief for certain commodities like coffee and bananas over the coming days.

Fedspeak

It was a busy week for fedspeak. In general, the tone was a cautious one regarding a potential rate cut for the Dec. meeting. For instance, Dallas Fed President Logan said “I think it would be hard to support another rate cut unless we were to get convincing evidence” from the data. Boston Fed President Collins said that it “will likely be appropriate to keep policy rates at the current level for some time”. San Francisco President Daly said that she had “an open mind” on the decision in Dec. Cleveland Fed President Hammack said “we’ve got this persistent high inflation that is sticking around”, and that getting inflation “back to 2% is critical for our credibility, and that’s our objective”. St Louis Fed President Musalem (a voter this year) noted that “We need to proceed and tread with caution, because I think there’s limited room for further easing”. And Minneapolis Fed President Kashkari suggested that he didn’t support the Fed’s last rate cut in October and that he was undecided in December. So regional Fed presidents not sounding like they are rushing into rate cuts. On the other hand, Governor Miran reiterated his call for the Fed to cut by a larger 50bps in Dec., saying that was still “appropriate”. Lastly, Atlanta Fed President Bostic said that he will retire once his term ends on February 28. His announcement was unexpected given his mandatory retirement wasn’t until 2031, and while whoever succeeds him will be appointed by the Atlanta Fed’s own board of governors, the nomination will still need approval from the overall Fed Board. The Atlanta Fed doesn’t vote next until 2027.

US data

ADP’s report of private payrolls still got outsized attention given the government shutdown. That showed the US lost an average of 11,250 private-sector jobs over the four weeks ending on Oct. 25, which added to fears that the labor market hadn’t held up into the shutdown. This is still a new high-frequency series, so it doesn’t have a long track record. In the same lines, the NFIB’s latest survey of small businesses showed a decline in the optimism index to a 6-month low of 98.2 in Oct. (vs. 98.8 expected), and for the first since May, we also saw the share planning to increase employment fall slightly (to net +15% vs. net +16% previously).Europe data Germany’s final HICP inflation for Oct. confirmed the flash reading of +2.3% y-o-y that came in 0.10% above expectations. The upside was driven by strong services inflation (+3.6% y-o-y in Oct from +3.5% in Sept), although details suggest this was mostly due to volatile travel items. Lingering inflation risks were brought up by ECB’s Schnabel, who stressed that while inflation is currently “in a good place” at 2%, risks were tilted “a little bit to the upside”. She noted “stickiness” in services inflation and mentioned geopolitical fragmentation and supply chain impact in areas such as rare earths as inflationary drivers. Also, German ZEW survey disappointed in Nov., with the economic sentiment indicator unexpectedly falling to 38.5 (vs. 41.0 expected). However, this survey is more second tier relative to the IFO.

Swiss data

Preliminary Q3 2025 GDP figures (adjusted for sporting events) showed a 0.5% q-o-q contraction, marking the largest decline since Q2 2020 and following a 0.1% growth in Q2. The result fell short of consensus expectations, which had predicted a 0.1% contraction. The decline was primarily attributed to a significant drop in value added within the chemical and pharmaceutical sector, leading to negative growth in the industrial sector overall, according to the accompanying statement. Meanwhile, the services sector experienced below-average growth. Detailed results are set to be released on 28 Nov. Overall, the SNB is navigating significant challenges, balancing the demands of market participants seeking safe havens and hedging against dovish scenarios, while also contending with difficult economic conditions. However, it is worth noting that this data may be considered backward-looking, and a recovery could be anticipated moving forward, supported by recent positive developments, including the 15% trade deal announced with the US.

UK data

The UK economy expanded by just +0.1% q-o-q in Q3 (vs. consensus at +0.2%), reflecting a slowdown compared to H1. This subdued growth was partly impacted by the temporary shutdown of the Jaguar Land Rover factory following a recent cyberattack. The primary driver of growth was an increase in investments, largely attributed to government investments, while business investments remained weak. Wage growth data showed more signs of easing, in line with consensus and BoE's latest forecasts, indicating further progress in disinflation. Employment continues to weaken, with unemployment rate surprising to the upside to 5%. Payrolled employment also declined by -32k, with vacancies increasing by just +1k, alongside a further slowdown in the vacancies-to-unemployment ratio.

Japan data

The economy shrunk at an annualized rate of -1.8% in the July-September period (vs. -2.4% expected), as US tariffs sent the nation’s exports sharply lower. On a q-o-q basis, GDP slipped -0.4%, the first contraction in six quarters, but smaller than the -0.6% drop the market expected. A big decline during the quarter came in exports, which were -1.2% down from the previous quarter. Japanese producer inflation increased by +2.7% y-o-y in Oct., slightly exceeding expectations for the month, thereby keeping markets alert to hawkish signals from the Bank of Japan. Lastly, the minutes from the BOJ’s Oct. meeting indicated that the nine-member board appears more inclined towards a near-term rate hike, aligning with the expectations of numerous market participants and consistent with Governor Kazuo Ueda’s recent indications that such a move could occur in the upcoming months.

China data

Industrial production increased by +4.3% y-o-y in Oct., which was below expectations and a decrease from a three-month high of +6.5%, as local manufacturers contend with weak domestic demand and trade tensions with the US. This represents the slowest growth in industrial production since August 2024. Simultaneously, retail sales rose by +2.9% y-o-y in Oct., surpassing market expectations of +2.7% but down from the 3.0% increase observed in the previous month. In a separate report, new home prices fell by -0.45% m-o-m in Oct., marking the steepest monthly decline in a year, which underscores the persistently weak demand in the beleaguered property sector which may require additional policy support. This follows a -0.41% decrease in Sept. Sept. and Oct. are typically peak sales periods.

Highlights

On rates

Treasury yields edged higher across maturities. The 2-year Treasury yield rose by +4.5bps to 3.61%, the 10-year yield increased by +5.1bps to 4.15%, and the longer 30-year yield climbed by +4.9bps to 4.74%. These movements were driven by hawkish comments from the Federal Reserve officials mentioning the need to get convincing evidence from the data and expressing similar skepticism about an additional rate cut in December. These comments had a notable impact on the rates market, leading to a revision in expectations for a December rate cut. For the first time since September, the probability of a December rate cut fell below the 50% threshold, declining from 67% to 43% by Friday’s close. In Europe, 10-year Bunds (+5.4bps) and BTPs (+4.0bps) mirrored the weekly moves in U.S. Treasuries, while OATs (-0.4bps) outperformed on budget-related news. This followed political developments, as the French National Assembly supported the suspension of the pension age increase until after 2027 to maintain the budget process. In the UK, reports indicated that Prime Minister Keir Starmer and Chancellor Rachel Reeves abandoned plans to increase income tax rates in the upcoming budget, signaling an optimistic projection of the fiscal gap. This announcement contributed to a significant rise in 10-year gilt yields, which surged +11.3bps over the week to 4.57%. In Japan, 10yr JGBs yields climbed +3.3bps to 1.69%, after news of a smaller than expected GDP contraction of -0.4% (vs. -0.6%), the first in six quarters.

Earnings

At this late stage of the third-quarter earnings season, 92% of the companies in the S&P 500 have reported their actual results for Q3 2025. The index is delivering solid results relative to analyst expectations, despite not experiencing the traditional downgrades in S&P 500 consensus projections during the six months leading up to the reporting period. Of these companies, 82% have reported actual EPS above estimates, exceeding the 5-year and 10-year averages of 78% and 75%, respectively. If this 82% figure holds through the end of the season, it will represent the highest percentage of S&P 500 companies reporting a positive EPS surprise for a quarter since Q3 2021. On average, companies are reporting earnings that are 7.0% above estimates and revenues that are 2.1% above estimates. While the revenue surprise is in line with the 5-year average of 2.1%, it is above the 10-year average. In terms of revenue performance, 76% of S&P 500 companies have reported actual revenues above estimates, surpassing the 5-year average of 70% and the 10-year average of 66%. Consequently, the blended revenue growth rate for the third quarter currently stands at 8.3%, up from 6.3% at the end of Q3 (September 30). All eleven reporting sectors are showing y-o-y revenue growth, led by the Information Technology, Health Care, and Communication Services sectors. This earnings season has particularly highlighted net profit margins. The S&P 500’s net profit margin for Q3 2025 stands at 13.1%, marks the highest net profit margin reported by the S&P 500 since at least 2009, and represents the seventh consecutive quarter of increasing net profit margins. The forward 12-month P/E ratio for the S&P 500 is 22.4, which is above both the 5-year average (20.0) and the 10-year average (18.7). In Europe, 89% of Stoxx 600 companies have reported Q3 earnings, with 57% surpassing EPS estimates, delivering a positive surprise of 2%, and achieving EPS growth of +1% y-o-y. However, excluding Consumer Discretionary, where Autos have experienced another weak quarter, European EPS growth improves to +3% y-o-y. At the sector level, six sectors are reporting y-o-y increases in net profit margins for Q3 2025 compared to Q3 2024, led by Information Technology (27.7% vs. 25.1%), Utilities (17.2% vs. 14.8%), and Financials (20.2% vs. 17.0%). Regarding tariffs implication there is positive news on this front. The term “tariff” or “tariffs” was mentioned in 238 earnings calls conducted by S&P 500 companies during this period, reflecting a quarter-over-quarter decline of 33% compared to Q2 2025, underscoring easing geopolitical tensions. Looking ahead, corporate earnings will continue, with the highlight of the week being Nvidia's earnings report on Wednesday, alongside Palo Alto Networks and US retailer Target. This will be accompanied by Home Depot's report on Monday, followed by Walmart on Thursday.

What to watch

• Monday: US Empire Manufacturing; Japan Q3 GDP; Singapore Exports
• Tuesday: US weekly ADP Estimates; RBA Policy Minutes
• Wednesday: US FOMC Minutes; UK and Eurozone CPI; Japan October Exports
• Thursday: US non-farm payrolls (Sep); Initial Jobless Claims; China Loan Prime Rates; Taiwan October Exports
• Friday: US Michigan University Survey and PMI; UK Public Finances & Retail Sales; Eurozone PMI; Japan CPI; Singapore Q3 GDP

* US federal data releases will resume on a regular schedule following the end of the government shutdown. Previous releases are currently being rescheduled.