• Renewed optimism around a potential US–China agreement is helping to lift market sentiment.

What Moved the Markets Last Week?

Softer US Inflation Supports Rate Cut Expectations:

September inflation data in the US came in slightly below forecasts, reinforcing expectations that the Federal Reserve will move ahead with a rate cut next week. Headline CPI increased by 0.3% month-on-month, while core inflation rose a more modest 0.2%. This marks the first major economic release following the prolonged government shutdown.

However, the White House has signalled that October inflation figures may be delayed if shutdown disruptions persist. Markets initially reacted with a weaker US dollar as investors increased their expectations for two additional rate cuts this year, though the currency recovered by the end of Friday’s trading session.

Global markets started the week on a positive note amid growing confidence that the US and China may reach a trade agreement ahead of the expected meeting between Presidents Trump and Xi on Thursday. Signs of progress have helped boost investor sentiment, particularly across risk assets.

In the US, economic growth is still projected to hold around 3% annualised in the third quarter, despite softer job numbers and ongoing tariff pressures. Markets are already pricing in a 0.25% rate cut from the Federal Reserve in October, with a potential follow-up cut in December. In addition, expectations that the Fed may end Quantitative Tightening as early as November could further support liquidity and financial conditions — generally a positive backdrop for equities and credit markets.

Over in the eurozone, the European Central Bank is anticipated to keep interest rates unchanged. Q3 growth is expected to be modest, but risks remain tilted to the downside due to weak trade flows and persistent economic uncertainty.

Meanwhile in the UK, there are no major economic releases scheduled this week. Investors will be watching closely for any developments or policy signals regarding the upcoming budget announcement.

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