October 2025
The past month continued the familiar tightrope act. On one side, President Trump’s tariff escalations and drumbeat of a possible US fiscal showdown nudged risk premia higher; on the other, Xi Jinping signalled a cautious détente on trade, hinting at a reset that slightly cooled cross-Pacific tensions.
Geopolitically, in Europe, the Russia–Ukraine war continued without resolution. Diplomatic theatrics offered little relief: Trump’s Budapest summit with Vladimir Putin was mooted, then cancelled within days after Moscow set hard-line terms. In Asia, President Xi used the ASEAN Summit in Kuala Lumpur to soften tone and court the Global South, even as discussions on digital trade, rare earths and maritime security revealed the depth of US–China rivalry, which culminated in a late-month Trump–Xi meeting in Busan that produced a one-year trade truce, pausing some export controls, rolling back selected tariffs and signalling cooperation on issues from fentanyl to shipping levies. The Middle East offered another set-piece with the Gaza meeting co-chaired by Trump and Egypt’s President el-Sisi that sketched post-conflict governance ideas but, without full Israeli and Palestinian representation, produced limited progress.
Investors spent October re-pricing the interest-rate path as inflation moderated and labour markets softened marginally, particularly in developed economies. The IMF’s ~3.2% global growth backdrop signalled “slow but steady”, giving markets permission to imagine lower real yields without requiring a collapse in activity. That set up a natural rotation, from pure defensives into selective cyclicals, from the longest-duration “dreams” into firms with tangible cash flows, while safe-haven demand persisted wherever geopolitical noise flared. Commodities flashed a more nuanced signal: energy remained under pressure from surplus dynamics and a firm dollar, while precious metals rode the hedge bid before handing back some gains; copper, tied to electrification and constrained mine supply, stayed firm.
The Fed trimmed administered rates and kept the funds range at 3.75–4.00%, but wrapped the move in caution: data, not autopilot, would drive what comes next, particularly with fiscal uncertainty complicating the picture. The ECB, facing inflation close to target, held its three key rates (deposit 2.00%, MRO 2.15%, marginal lending 2.40%) and doubled down on a meeting-by-meeting posture.
In equities, the US set the pace, with the S&P 500 and Nasdaq hitting fresh highs—up 2.2% and 4.7% respectively—driven by continued strength in big tech and AI leaders. In the UK, the FTSE 100 touched record territory, buoyed by gains in pharmaceuticals and mining, ending the month 3.9% higher. Germany’s DAX managed only a modest 0.3% rise, as mixed earnings and stubborn inflation data capped momentum. In Asia, Japan extended its outperformance amid policy clarity and a powerful tech-cyclical rally, with the Nikkei 225 surging 16.7% in an extraordinary month, while China’s markets were more restrained, edging up 1.9%.
In commodities, oil sagged for a third consecutive month as surplus chatter grew louder. Brent hovered in the mid-$60s, ending the month down 3.4%, while WTI slipped 2.4%, weighed by a firm US dollar, softer demand signals—particularly from China—and rising inventories. Intermittent geopolitical jolts sparked brief rallies but failed to overturn the prevailing surplus narrative; forward projections for 2025–26 remained soft, tempering the inflation impulse from energy. Precious metals told the opposite story: gold surged to record highs above $4,100/oz in early October on safe-haven demand, heavy central-bank buying and lower-rate expectations, before profit-taking trimmed gains by about 8% from the peak, yet it still closed the month up 3.7%. Silver followed suit, buoyed by supply tightness and industrial demand, finishing up 3.0%. Copper, increasingly seen as the market’s barometer for electrification, climbed toward record territory on supply disruptions in key producing nations and sustained structural demand.
Crypto broke from its seasonal script as “Uptober” failed to materialise: Bitcoin posted its first October loss since 2018, slipping 3.5% on the month, while Ethereum fell nearer 8% and higher-beta tokens fared worse. A mid-month shock—tariff headlines and trade frictions—triggered record one-day liquidations of leveraged positions, exposing thin liquidity in pockets of the market. The Fed’s careful messaging—that further cuts were not a foregone conclusion—dampened the “liquidity tide lifts all boats” narrative that had powered the prior quarter’s exuberance. Flows into exchange-listed products cooled, derivatives positioning thinned and the total crypto market cap eased to the high-$3 trillion range by month-end.