MarketWatch for October 2025

Markets generally moved higher in October. Technology companies were the main drivers, especially those involved in artificial intelligence (AI). Big names like Nvidia, Apple, and Microsoft saw strong gains thanks to continued demand for advanced technology.

There were some ups and downs during the month, caused by trade tensions and concerns about smaller US banks. These worries eased later on. The US central bank (Federal Reserve) cut interest rates slightly and ended its programme to reduce money supply, but signalled that further cuts are unlikely in the near term.

US shares rose during October, supported by strong results from technology companies. AI-related businesses continued to attract investor interest, helping to push markets higher. The Federal Reserve lowered interest rates to support the economy, but warned against expecting further cuts soon. While there were some concerns about trade and banking early in the month, these eased as confidence returned.

European shares were steady overall. Political uncertainty in France made headlines after the Prime Minister briefly resigned and then returned to office, which led to a downgrade of France’s credit rating. The European Central Bank kept interest rates unchanged, while inflation continued to move closer to its target. Overall, it was a relatively quiet month for European markets.

UK shares saw modest gains in October. Government borrowing reached its highest level since the pandemic, creating a challenging backdrop ahead of the November Budget. At the same time, UK government bond prices rose as investors anticipated possible interest rate cuts from the Bank of England. This helped to support confidence in the market.

Japanese shares performed strongly during the month. The country appointed its first female Prime Minister, who formed a coalition focused on economic stimulus and reforms. Investors welcomed these developments, and optimism helped push markets higher. The Japanese currency remained weak, as markets expected the Bank of Japan to delay any further interest rate rises.

Emerging markets outperformed global peers in October. South Korea and Taiwan led the way, thanks to strong demand for AI technology and new trade agreements. South Korea benefited from a major investment deal with the US, while Taiwan continued to thrive on technology exports. In contrast, China lagged behind as trade uncertainty weighed on its market.

Government bonds generally rose in value as expectations grew for future interest rate cuts. Corporate bonds were mixed: European bonds improved slightly, while US bonds faced some pressure due to concerns about credit risk. UK government bonds performed well as investors anticipated a more supportive stance from the Bank of England.

Oil prices fell to their lowest level in five months due to high supply and easing geopolitical tensions. In contrast, gold prices surged to record highs early in the month as investors sought safety, before easing later as confidence returned. Other commodities were mixed, with industrial metals supported by long-term demand trends.

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