Global investment market review: October 2025 – performance & highlights

During October 2025, the MSCI ACWI Index, a representative measure of global equities across developed and emerging markets, increased 4.8% in sterling terms and 2.8% in local terms. Japan, emerging markets and the UK were among the strongest regions in local currency terms. The month saw fresh record highs achieved by many markets at the country level, including indices in the US, Japan and UK. Enthusiasm for artificial intelligence-related stocks pushed the outperformance of the growth style over value, while reduced trade tensions also boosted market sentiment. A ceasefire was announced in Gaza, which also provided positive sentiment. In fixed income, the ICE BofA Global Government Index rose 1.9% in sterling terms and 0.8% in local currency terms. Sterling lost ground against the US dollar.

Crude oil futures prices fell back as a ceasefire was agreed in the Middle East, before rallying somewhat on news of US sanctions against Russian oil companies in the second half of the month. European natural gas futures were broadly flat.

The FTSE 100 Index, a commonly used representative benchmark of the UK’s largest equities, rose 4.1% and reached a record high at quarter-end. The FTSE All Share Index rose by 3.7%. The UK’s annual inflation came in at a lower-than-expected rate of 3.8% in September, matching the pace set during July and August. Unemployment edged higher, hitting 4.8% in the three months to August, compared with 4.7% in the previous three readings. The flash UK manufacturing Purchasing Managers’ Index (PMI) figure made a robust improvement in October, rising to 49.6 from the previous month’s 46.2, helped by restocking in the supply chain. Preliminary UK services sector PMI continued to expand with a rise to 51.1 in October from 50.8 in September. (Note that a PMI figure under 50 indicates contraction.)

The month saw fresh record highs achieved by many markets at the country level, including indices in the US, Japan and UK.

In US equities, the S&P 500 Index added 4.8% in sterling terms and was up 2.3% in US-dollar terms. The Nasdaq Composite Index, which has a growth focus, moved 7.3% higher in sterling and rose 4.7% in local terms. The US struck a trade deal with South Korea and reached a trade agreement with China towards month-end. Growth stocks continued to outperform. Indeed, just four months after becoming the world’s first US$3 trillion company by market-capitalisation, US-based AI technology firm NVIDIA stepped over the US$5 trillion mark in October. The government shutdown continued amid a budget impasse between Republicans and Democrats. In the final week of the month, the Federal Reserve (Fed) reduced its key interest rate by 25 basis points (bps) on concern about risks to the job market. However, comments from the Fed signalled that a further rate cut in December was perhaps less likely than had previously been expected. US annual inflation edged up further in September, reaching 3.0%, compared with 2.9% in August and expectations for a rise to 3.1%. Because of the government shutdown, there was no release of the non-farm payroll report from the Bureau of Labour Statistics. The preliminary reading of the US manufacturing PMI for October edged slightly higher – from 52 to 52.2 – helped by stronger new orders. The early reading of the services PMI also moved further into expansionary territory.

There was an increase of 3.0% in the MSCI Europe ex UK Index in sterling terms. At the country level, The Netherlands, Sweden and France were among the main winners, while Germany declined slightly in local currency terms. French politics created most of the headlines as the country’s newly installed prime minister, Sébastien Lecornu, resigned before being reappointed soon after. Additionally, his government came through two no-confidence votes. An early reading of Eurozone third quarter GDP reached an estimated 0.2% quarter-on-quarter (q/q) growth, which was slightly up on the first quarter and ahead of market expectations. Spain’s GDP expanded by 0.6% q/q and France grew by a much better-than-expected 0.5% q/q, while GDP in Germany and Italy lagged. The European Central Bank (ECB) extended its run of keeping rates on hold to a third successive meeting as a result of improving confidence about the underlying robustness of the euro area’s economy. Annual inflation of 2.1% was announced for October, representing a slight slowdown from 2.2% in September. October’s flash eurozone manufacturing PMI stepped back to the threshold of expansion once again, with a reading of 50, compared to the modest contraction of 49.8 in September. The preliminary services PMI moved further into expansionary territory.

Just four months after becoming the world’s first US$3 trillion company by market-capitalisation, US-based AI technology firm NVIDIA stepped over the US$5 trillion mark in October.

The MSCI Japan Index was up 5.9% in sterling terms and 7.9% in local terms. Japan’s stock market gained as Sanae Takaichi, was named as the country’s new prime minister, with investors expecting her government to have a pro-business stance. Additionally, as the yen declined against the US dollar, Japan’s exporters also bolstered the market’s advance. The Bank of Japan (BoJ) kept its short-term interest rate at 0.5% in October but continued to signal further rate rises if the country’s economy continues to evolve as expected. Annual inflation stepped up from August’s 2.7% to hit 2.9% in September as electricity prices gained ground.

The MSCI Emerging Markets Index added 6.8% in sterling terms and 4.6% in local terms. South Korea made strong gains in local currency terms, while Taiwan, the United Arab Emirates and India also advanced. Brazil moved higher but trailed other major emerging markets, while China declined in local currency terms. South Korea’s main equity market hit record highs helped by optimism around the use of semiconductors in the AI drive. Korea sealed a trade deal with the US towards month-end. Similarly, Taiwan’s equity market reached new highs on positive sentiment towards technology stocks. As expected in the market, the Reserve Bank of India (RBI) decided not to reduce rates any further in October, following 100 bps of cuts during the calendar year to date. The RBI, however, did raise its growth forecasts for the current fiscal year, while reducing its annual inflation estimate. India’s annual inflation slowed in September on waning food prices, to hit an eight-year low of 1.54%, compared with 2.07% in August. China’s GDP saw 4.8% year-on-year (y/y) growth in the third quarter, this was in line with market consensus but lower than the 5.2% y/y growth in the previous quarter, partly because of trade tensions. However, Chinese industrial production improved from 5.2% y/y in August, to a better-than-expected 6.5% y/y in September, helped by the manufacturing segment.

There was a gain of 6.2% in the MSCI AC Pacific ex Japan Index in sterling terms and a rise of 4.2% in local terms. At the country level, South Korea, Taiwan and India advanced, while China declined. Despite cutting during its last three policy meetings, Bank Indonesia held rates as it continues to believe inflation will remain contained, while still supporting economic growth and a stable currency. The Bank of Korea continued to hold its base rate steady at 2.5% in October, but rhetoric from the central bank appeared to indicate further interest rate cuts may be forthcoming. Annual inflation stepped higher in Australia, moving from 2.1% in the three months to June to hit 3.2% during the third quarter, in part due to price rises for vehicle fuel and electricity.

In fixed income markets, government bonds broadly outperformed corporate credit. High yield and investment grade credit were flat to marginally down over the month, in local currency terms. The 10-year US Treasury yield declined slightly (prices rose), edging down from 4.15% to 4.10%. The UK gilt yield saw a sharper reduction (prices rose) amid rising expectation of further rate cuts coming through next year at the Bank of England, as inflation was weaker than expected and growth remained lacklustre. Government bond yields also fell in Europe, notably in Italy and Spain, as inflation expectations remained modest and perceptions about fiscal positions have improved. Emerging market local-currency government debt also gained ground.

The FTSE EPRA Nareit Developed Index, a measure of the performance of Real Estate Investment Trusts (REITs), rose just 0.9% in sterling terms and 0.2% in local terms. Note that REITs tend to be sensitive to interest rate expectations. During the month to end-September – the latest period with available figures – the MSCI UK Monthly Property Index added 0.6%. The office and industrial segments were relatively robust as the interest rate environment improved.

* All index data are shown in total return sterling.
Source: FE Analytic