The Davy Digest - 20th October 2025

It was another turbulent week for markets as headlines continued to emerge over renewed trade tensions between China and the US. Jerome Powell appeared to confirm that the Federal Reserve was on track to cut rates again this year, leading equities higher through the first half of the week. On Thursday, concerns over weakness in regional banks pared some of the earlier gains. The government shutdown also continued in the US, meaning that it was another week without economic data, such as September’s inflation print.

In Europe, the newly reappointed French Prime Minister, Sébastien Lecornu, survived an early no-confidence vote, as France’s credit rating was downgraded by S&P amid ongoing fiscal concerns. In the United Kingdom, Gross Domestic Product grew by 0.1% in August after contracting in July, while unemployment rose to 4.8%.

Last week's highlights

	Fed Beige Book (15/10) – Suggested a moderation in momentum within the US economy Fed Speak – Powell confirms October cut likely, and Waller on capital relief policy
	German CPI (14/10) – Increased by 2.4% YoY in September Eurozone September CPI (17/10) – Increased to 2.2%, in line with expectations
	UK Unemployment Rate (14/10) – Rose to 4.8% (vs 4.7% expected) UK GDP MoM August (16/10) – Economy grew 0.1% MoM, in line with expectations
	China CPI (14/10) – Prices increase 0.1% month-on-month, slower than expectations

This week, we will get an update on the health of the consumer in the US and Europe, as a consumer confidence reading is released in Europe and the University of Michigan survey is published in the US. Additionally, Purchasing Managers’ Index (PMI) surveys are due out in the US, UK, and Eurozone. Elsewhere, in Japan, there will be an inflation print ahead of next week’s central bank meeting.

What's on the radar

	S&P Preliminary October PMIs (24/10) University of Michigan Survey (24/10) US Consumer Price Index (24/10)
	Eurozone Consumer Confidence (23/10) HCOB October PMIs (24/10)
	UK Inflation (22/10) UK Retail Sales (24/10) S&P Preliminary October PMIs (24/10)
	China Retail Sales (20/10) Japan Inflation (24/10)

Chart of the moment - Flight to safety?

Source: Bloomberg, September 20th 2025. All figures are calculated as price return in USD. Equity returns use S&P 500 performance, bond returns use US 10-year Treasury futures.

• Over the last ten days, investors in the US have been shifting away from traditional risk assets and into safe havens, notably gold and US Treasuries.
• The rotation was initially driven by renewed trade tensions between the US and China, as disputes continued over tariffs and export controls on rare earth minerals.
• The move accelerated on Thursday, following concerns over the health of the US credit market, after two regional banks disclosed issues around fraud with borrowers.
• Gold has been one of the main beneficiaries of this trend, rising by more than 10% since the beginning of the month.

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