The week that was …
Economic round-up
$30bn of tariffs cut at Trump-Xi summit
The US and China agreed to reduce tariffs on $30bn (£22.6bn) of goods and launch a dialogue on AI during president Xi Jinping’s visit to Washington last week. The tariff reductions cover US exports, such as agricultural goods, wood and cosmetics, as well as US imports including small appliances, toys and decorations. Read more in ‘In focus’ below and from Reuters here
UK growing faster than expected – OECD
The UK economy is on course to grow faster than expected this year, according to the OECD, with output holding up better than forecast in the face of the US-Iran war. The organisation, which now expects annual economic growth to reach 1.1% this year – up from a projection of 0.9% in June – said the UK was benefitting from “solid domestic demand growth in the second quarter”. Read more from the Times here
UK business sentiment cools – but still positive
September data highlighted an upturn in UK private sector business activity for the third consecutive month. The rate of growth eased, however, reflecting a loss of momentum in both the manufacturing and service sectors. The Flash UK PMI Composite Output index stood at 51.7 in September – above the 50.0 ‘no-change’ threshold but down from 52.5 in August and the lowest level since June. Read more from S&P Global here
Inflation dents consumer confidence in Eurozone …
With geopolitical uncertainty and inflation weighing on sentiment, consumer confidence in the Eurozone area fell to -16.5 in September 2026 – down from -15.5 in August. This was below consensus forecasts of -16 and halts a four-month streak of improvement that had lifted the index to a six-month high. Read more from Trading Economics here
… though private sector strengthens further
The latest Eurozone PMI from S&P Global signalled strengthening growth in the Eurozone private sector during September. Output rose at the fastest pace since April 2023 amid solid expansion in both the services and manufacturing sectors, although job creation remained muted. The index rose to 53.1 in September from 52.0 in August. Read more from S&P Global here
US business activity growth accelerates
US business activity growth accelerated for a fourth successive month in September to reach its fastest rate in more than five years. A further surge in service sector business activity was accompanied by a renewed improvement in manufacturing output growth. Employment also rose sharply. The flash S&P Global US PMI Composite Output index rose from 56.0 in August to 58.4 in September. Read more from S&P Global here
Inflationary pressures remain on Japan businesses
Japanese business activity growth softened in September, with the rate of expansion slipping to a four-month low. Both goods producers and service providers recorded slower rates of output and new-order growth compared with the previous month. Inflationary pressures meanwhile remained intense. The seasonally adjusted S&P Global Flash Japan PMI Composite Output index fell from 53.5 in August to 52.5 in September. Read more from S&P Global here
Markets round-up
Imminent corporate debt rollover a concern …
A growing wall of US corporate debt is set to mature from 2027, putting pressure on companies to refinance borrowings raised at ultra-low interest rates during the pandemic. Around $4.3tn (£3.2tn) of non-financial corporate bonds issued in US markets will mature between 2027 and 2031, according to a Reuters analysis of LSEG data. Read more from Reuters here
… as US government debt worries persist
A sell-off in longer-dated US government debt resumed on Friday, pushing the country’s 30-year borrowing costs to their highest level since mid-2004. 30-year treasury yields climbed as much as 0.07 percentage points to 5.53% in New York. The yield later slipped back slightly to 5.49%, as oil prices fell, but remained higher on the day. Read more in ‘In focus’ below and from the FT here
International investors snap up US equities
International investors made a record $942bn in net purchases of US equities and investment fund shares in the 12 months to July. The flows represented the highest rolling 12-month total since records began in 1985 and was an increase of 62% from the same period in 2025. Read more from the FT here
Wall Street ends week higher
US equities rose on Friday as Wall Street wrapped up a volatile week of trading, in spite of the ongoing disruption in the treasury market. The S&P 500 climbed 0.51% to close at 7,743.41, while the Nasdaq Composite gained 0.5% to reach 27,068.72. The Dow Jones Industrial Average advanced 478.64 points, or 0.93%, to end at 51,828.62. Read more from CNBC here
European diesel costs rise on US threats
The price of diesel climbed in Europe, as the continent faced the “catastrophic” prospect of being cut off by the US, its biggest supplier. European benchmark diesel futures jumped as much as 7% to $1,528 a tonne in morning trading in London, equivalent to more than $200 a barrel, even as crude prices were little changed. US president Donald Trump had earlier threatened to ban diesel exports. Read more from the FT here
“While China remains behind the US on the most sophisticated AI models, its cheaper ‘open-source’ models may prove to have a wider reach.
Selected equity and bond markets: 18/09/26 to 25/09/26
| Market | 18/09/26 (Close) |
25/09/26 (Close) |
Gain/loss |
|---|---|---|---|
| FTSE All-Share | 5744 | 5763 | +0.3% |
| S&P500 | 7651 | 7743 | +1.2% |
| MSCI World | 4914 | 4958 | +0.9% |
| CNBC Magnificent Seven | 455 | 469 | +3.0% |
| US 10-year treasury (yield) | 5.00% | 5.17% | |
| UK 10-year gilt (yield) | 5.30% | 5.34% |
Investment round-up
FSSA revives ‘First State’ brand
FSSA Investment Managers is set to rebrand as First State Investments from 24 November, returning to the name under which the investment team operated for nearly two decades. The team had adopted the FSSA name in 2019. The First State name and a new visual identity will be introduced across Asia, Europe and the US.
Schroders creates pan-European equity platform
Schroders is set to offer clients access to its UK and European equities strategies, spanning Core and Alpha products, via the creation of a pan-European equity platform. The combined structure will bring together almost 30 investment professionals with a shared investment framework. It will no longer include a UK Quality strategy and manager Graham Ashby has left the group.
CT launches actively managed credit strategy
Columbia Threadneedle Investments has launched the CT (Lux) European Corporate Bond Plus fund, an actively managed European credit strategy investing primarily in investment-grade corporate bonds. The fund, which has been created by converting the CT (Lux) European Strategic Bond fund, will be managed by Christopher Hult and invest mainly in euro-denominated investment grade corporate bonds.
Premier Miton proposes smallcap merger
Premier Miton has set out merger plans for its UK Growth fund and the Tellworth UK Smaller Companies fund. The merger remains subject to shareholder approval at an extraordinary general meeting scheduled for 14 October. Titan Square Mile analysts have removed the UK Smaller Companies fund’s ‘A’ rating in response to the potential merger.
Sprott AM and HANetf launch rare earths ETF
Sprott Asset Management and HANetf have launched the Sprott Rare Earths Ex-China UCITS ETF. It invests in companies outside China involved in the mining, separation, refining or production of rare earths, which are critical to technologies spanning defence, energy, electrification, AI and advanced manufacturing. The ETF is listed on London Stock Exchange, Xetra and Borsa Italiana
Fund selectors expect private market boom
European fund selectors expect private markets participation to broaden, as adoption of newer structures such as European Long Term Investment Funds continues to grow. The latest Global Private Investment Markets Study, conducted by Research in Finance in collaboration with Neuberger, showed the number of European retail and wholesale investors allocating to private markets is expected to rise to almost nine in ten (88%) over the next five years, up from the current level of 63%.
Boost for cybersecurity ETFs
European-listed cybersecurity ETFs attracted €155.9m (£133.8m) of net inflows in the week to 18 September, as investors chased recent strong performance. Trackinsight figures showed the theme attracted more money than global infrastructure and biotechnology and genomics, which gathered €76.4m and €47.2m respectively.
BG US Growth holders urged to reject Saba proposals
Shareholders in Baillie Gifford US Growth risk seeing the trust’s strategy dismantled just as its recovery gathers pace if they side with Saba Capital Management at the trust’s AGM on 23 October, according to Investec analysts. Investors had a choice, they argued, adding: “Support the incumbent board, manager and strategy, or risk destabilising the company by electing a Saba Capital MD alongside two nominees repeatedly deployed in Saba’s campaigns, whose close association raises material questions about their independence.”
F&C investment trust cuts US weighting
The F&C investment trust cut its exposure to US equities by £240m in the first half of the year. It pulled money from US core and large-cap growth strategies and increased its allocations to emerging markets and ‘global quality-growth’ assets. The trust’s fund manager Paul Niven said market leadership was beginning to shift away from the US and its Magnificent Seven stocks.
… and the week that will be
All eyes on US jobs and inflation numbers …
Investors will sift through reports on US employment and inflation over the coming week to assess the chances of a sharper trajectory of interest rate hikes, which could undermine the US stockmarket’s recent rally. The monthly employment report, due on 2 October , will be the main event for Wall Street, while Wednesday’s monthly read of the personal consumption expenditures price index – an important gauge for the US Federal Reserve – should give insight into inflation trends. Read more from Reuters here
… and UK consumption trends
A series of results from bellwether UK companies will offer an update on UK consumption trends. Carnival’s third quarter covers the key summer trading period, and the market will be looking for evidence strong demand is still converting into profitable growth. Greggs’ third-quarter update will show whether the baker can keep momentum rising after a strong first half, while JD Wetherspoon’s full-year results follow another profit warning – although the bigger question is what the current cost backdrop means for guidance. Read more from Hargreaves Lansdown here
The week in numbers
US economic growth: Consensus expectations for the final reading of second-quarter GDP growth in the US is that it will stand unrevised at 1.5% quarter-on-quarter.
US inflation: Consensus expectations are that the key Personal Consumption Expenditures price index will show a month-on-month rise in core prices of 0.3% in August, compared with 0.2% the previous month.
US business sentiment: Consensus expectations have the US ISM manufacturing purchasing managers’ index (PMI) falling to 54 in September, down from 54.6 in August.
US consumer confidence: Consensus expectations are that the September reading of the US consumer confidence index will be 89.0 – down from 89.4 in August.
US employment numbers: Consensus expectations have the US ADP employment report showing 49,000 jobs created in September, up from 38,000 in August.
US payroll data: Consensus expectations have September non-farm payrolls rising by 90,000 – down from 162,000 a month earlier. The US unemployment rate is expected to hold at 4.1%, while average hourly earnings rise 0.2% month-on-month and 3.1% year-on-year – from 0.3% and 3.1% respectively.
Eurozone inflation: Consensus expectations are that the flash September reading of inflation in the Eurozone will show prices rising 3.4% year-on-year, versus 3.2% the previous month; and 0.3% month-on-month, from 0.4%. Core inflation is expected to be 2.5% year-on-year, up from 2.4%.
China business sentiment: Consensus expectations for the September reading of the China RatingDog PMIs is that the manufacturing version will hold at 51.5 while the services equivalent rises to 51.7, from 51.4 in August.
In focus: Thaw point
Last week’s US-China summit between presidents Donald Trump and Xi Jinping may not have delivered much in the way of progress on AI or the Iran war but investors can at least breathe a sigh of relief over trade. The world’s two largest economies agreed to extend their one-year trade-war truce to 10 January – it had been set to expire on 10 November –while US treasury secretary Scott Bessent even hinted a more substantive deal could be in the pipeline.
For China, though, this is less important than it was. As Michael Browne, global investment strategist at the Franklin Templeton Institute, points out: “The level of China exports to the US has contracted significantly since the first tariffs came in in 2017.” Other countries, principally in Europe and the rest of Asia, have picked up the slack while the Chinese administration has been smart in minimising its reliance on the US, which has left president Trump with less leverage in the recent negotiations.
The latest RatingDog purchasing managers’ index (PMI) reported new orders placed with Chinese manufacturers rising for the 15th consecutive month in August – the longest period of growth since 2018. The PMI rose to a two-month high of 51.5 from July’s 50.9. “The Chinese export machine is alive and working extremely efficiently,” notes Browne.
The bigger issue for China has been its consumer economy, which remains hidebound by the fragility of the country’s property sector. This is evident in the weakness of the import market, says Browne, adding: “Imports have been flat for several years. If we adjust that for Chinese GDP, imports as a percentage have been shrinking quite significantly since 2021.”
For his part, Robin Parbrook, co-head of Asian alternative investments at Schroders, says: “China’s economic backdrop remains sluggish. It is still reeling from a property bust, which has suppressed consumption because most Chinese wealth is tied up in property rather than income-generating assets.” Retail sales have continued to miss forecasts, he adds, and the Chinese government has not loosened fiscal policy as much as expected.
China has lagged as a market since I first started investing in Asia in 1990 – despite the economy going from bicycles to bullet trains over the course of one generation.”
This domestic weakness appears the primary reason sentiment has been so weak on the Chinese stockmarket. The Hang Seng is down 4.4% for the year to date, while the Shanghai Composite is down 2%. The average fund in the IA China/Greater China sector is down 0.1%, with growth strategies generally faring better than value ones.
Yet Parbrook says he is overweight China for the first time in 20 years. “When it comes to investing in Asia, remember this – it is about the companies, not the economy,” he explains. “Stockmarkets here have never been well-correlated to GDP growth. China, for example, has lagged as a market since I first started investing in Asia in 1990 – despite the economy going from bicycles to bullet trains over the course of one generation. Macro is a poor guide to where the bottom-up opportunities are.”
Parbrook’s overweight position is driven by idiosyncratic opportunities as well as a general improvement in corporate governance standards. The corporate governance story echoes similar regimes in Japan and South Korea, he continues, yet remains underappreciated by investors.
“Companies have stopped diluting shareholders and started buying back shares and paying dividends,” he notes. “Tencent has been buying back stock aggressively, for example, and we are seeing the same discipline from some consumer names too. Industry consolidation is coming through in select sectors, return on capital employed is improving and the market is cheap.”
From the bottom-up, there are undoubtedly opportunities in the AI complex. While China remains behind the US on the most sophisticated AI models, its cheaper ‘open-source’ models may prove to have a wider reach. “We do not see AI as a winner-takes-all race,” says Linda Lin, manager on the Baillie Gifford China Growth trust.
“The US may continue to lead in frontier models and advanced computing, while China could lead in making AI cheaper, more widely available and embedded across the economy. The outcome will depend not only on access to chips and power, but also on model efficiency, distribution, adoption and the ability to turn technological progress into sustainable commercial returns.” It is becoming clear that most companies do not need the frontier models to achieve the promised productivity gains from AI.
China is on- track to become the world’s first ‘electrostate’, providing a template for countries across the region to follow.”
China is also leading the way on clean energy. It has embedded sufficient flexibility in its energy system to be able to pare back its oil imports during the recent oil crisis – as we discussed in this space last week – which has helped keep the price of oil lower. Indeed, China is on-track to become the world’s first ‘electrostate’, providing a template for countries across the region to follow.
According to Robeco analysts, China’s clean tech ascendancy was not initially motivated by climate change but rather economic survival. “An electrified, renewable-powered economy offered a path to reduce exposure to external shocks and strengthen long-term economic competitiveness,” they explain.
Nevertheless, it has become a clear source of strength, with clean tech sectors nearly doubling in real value between 2022/25. While there is overcapacity in some parts of the clean energy complex, it has been a powerful export sector for China as well.
A greater question mark continues to hover over consumption and property stocks but managers, such as Dale Nicholls on the Fidelity China Special Situations trust, believe there is potential for the property market to revive.
“We do not necessarily need to see a sharp recovery in property prices,” he elaborates. “Greater stability alone could help restore confidence and encourage a gradual recovery in consumption. Combined with healthier household balance sheets and early signs of improvement in employment, these developments suggest that parts of the domestic economy are beginning to evolve, even if the recovery remains gradual.” Nicholls is invested in China Resources Land and China’s Real Estate Investment Trust to lean into this potential recovery.
The Chinese stockmarket has been lacklustre, held back by the country’s domestic weakness, but there are significant pockets of growth across the country’s economy that present opportunities for investors. In the short term, at least, a thawing in US/China relations may help sentiment.
Read more on this from Robeco here
In focus: Borrowed time
Equity markets cannot put off a reckoning with the bond markets indefinitely. Pressure on bond markets continues to rise, with the US 10-year treasury yield surging above 5%. While the equity market has yet to respond emphatically, signs of problems are emerging. The biggest risk is that higher borrowing costs derail the AI spending on which the current bull market depends.
The risk-free rate is now at its highest level in almost two decades and, as Daniela Hathorn, senior market analyst at Capital.com, explains, this raises the discount rate applied to future profits. “Technology stocks are particularly exposed to that tension because so much of their valuation depends on future cashflows,” she continues. “The Nasdaq therefore lost momentum after touching a record on Tuesday, while semiconductor stocks came under pressure as yields climbed.”
The situation also heaps pressure on these businesses as the hyperscalers have turned to corporate bond markets to support their AI spending plans. With government bond yields rising, the cost of future debt increases and these companies need a higher return on their investments to justify their spending. At a time when the returns from AI are still relatively uncertain, this creates a potential headwind.
Other assets are also in the firing line and Hawthorn points out that gold has been another casualty of the rates repricing. “Higher real yields and a stronger dollar increase the opportunity cost of holding bullion,” she continues. “Safe-haven demand generated by the Middle East conflict continues to provide some underlying support but, for now, it has been insufficient to overcome the rates headwind.”
For his part, Nicolas Bickel, group head of investment private banking and CIO at Edmond de Rothschild Group, says the firm is increasingly factoring in higher borrowing costs. “The increasing interest rates resulting from substantial public deficits, persistently high inflation – which is expected to continue exceeding central bank targets – and heightened political instability are likely to weigh on the cost of capital and, ultimately, on global growth,” he adds.
“We remain constructive on equity markets in most regions but selectivity remains essential, as does diversification beyond technology players into sectors benefiting from different catalysts, such as financials and industrials, energy and communications.”
Equity markets have – thus far – been relatively immune to the problems in the bond market but the status quo is fragile. While the technology sector looks vulnerable from rising borrowing costs, however, the remainder of the market trades on more appealing valuations and does not appear to have the same fragility. There is still some room for optimism.
