Global Economy & Markets, Weekly Roundup 06/10/25
US equities brushed off government shutdown uncertainty, with the S&P500 having increased by +7.8% in Q3:2025
Global equity markets posted strong gains in September, with the MSCI ACWI up by +3.5%. Monetary policy easing provided support, as central banks cut policy interest rates in 11 of the largest 25 economies, with economic growth remaining decent.
Market breadth was rather narrow in September, with 32% of stock indices outperforming the headline global index. Semiconductors (+10.5%) and Technology Hardware (+9.2%), strongly overperformed on a sectoral basis due to a revived bullish sentiment towards the Artificial Intelligence investment theme.
The S&P500 rose by +3.5%, its strongest September performance in fifteen years, to close its best quarter (+7.8%) since 2020. With corporate earnings expectations increasing by a shallower pace, equity valuations have climbed further. Note that the 12-month forward Price-to-Earnings ratio stood at 23.0x, well above the 20-year average of 16.3x, with the Federal Reserve Chair Powell, commenting recently that equities appear “fairly highly valued”.
Emerging Markets overperformed in September (+7.0%), with the MSCI China increasing by +9.4%. The rise was concentrated to Alibaba (9% weight) which rose by +32% month-over-month, benefitting from a stronger AI investment push. The EuroStoxx also posted strong gains of +2.7% in September, with the 12-Month Forward Price-to-Earnings ratio at 14.6x, versus a 20-year average of 12.8x.
On Monday October 6th, French assets came under modest selling pressures following the unexpected resignation of French PM Lecornu. The CAC40 index decreased by -1.3% and 10-Year French German Government bond spreads widened by +5 bps to 86 bps. The euro exchange rate depreciated by -0.6% to EUR/USD 1.167, while other European major equity indices were broadly unperturbed by the renewed French political uncertainty (as of 15:00 EEST).
10-Year US Treasury bond yields decreased by -8 bps in September, with some further decline so far in October (-3 bps to 4.12%), following further indications of soft job creation and more dovish Fed expectations. Based on overnight index swaps, the Fed is expected to cut interest rates by 25 bps in each of the next two meetings by end-2025 are expected, at a target range of 3.50% - 3.75%.
According to the National Employment Report by ADP, the US private sector shed -32k jobs in September, following a reduction of -3k in August, versus a 12-month average of +96k and well below consensus estimates for +52k.
The official labor market report for September, originally due for October 3rd, has been postponed as the US Federal government entered (October 1st) a partial shutdown for the first time since early-2019. Economic effects will depend mainly on the duration of the shutdown and Administrations’ choices regarding which “non-essential” operations to be put on hold.
Having said that, recent US economic activity data have been stronger than expected. Real GDP growth in Q2:2025 was revised up by +0.5 pps to +3.8% qoq saar (+2.1% yoy) in the 3rd estimate, following -0.6% qoq saar in Q1:2025. Private consumption (c.70% of US GDP) accounted for the bulk of the upward revision, with quarterly growth of +2.5% qoq saar instead of +1.6% qoq saar initially.
Global equity markets posted strong gains in September, with the MSCI ACWI up by +3.5%. Monetary policy easing provided support, as central banks cut policy interest rates in 11 of the largest 25 economies, with economic growth remaining decent.
Market breadth was rather narrow in September, with 32% of stock indices outperforming the headline global index. Semiconductors (+10.5%) and Technology Hardware (+9.2%), strongly overperformed on a sectoral basis due to a revived bullish sentiment towards the Artificial Intelligence investment theme.
The S&P500 rose by +3.5%, its strongest September performance in fifteen years, to close its best quarter (+7.8%) since 2020. With corporate earnings expectations increasing by a shallower pace, equity valuations have climbed further. Note that the 12-month forward Price-to-Earnings ratio stood at 23.0x, well above the 20-year average of 16.3x, with the Federal Reserve Chair Powell, commenting recently that equities appear “fairly highly valued”.
Emerging Markets overperformed in September (+7.0%), with the MSCI China increasing by +9.4%. The rise was concentrated to Alibaba (9% weight) which rose by +32% month-over-month, benefitting from a stronger AI investment push. The EuroStoxx also posted strong gains of +2.7% in September, with the 12-Month Forward Price-to-Earnings ratio at 14.6x, versus a 20-year average of 12.8x.
On Monday October 6th, French assets came under modest selling pressures following the unexpected resignation of French PM Lecornu. The CAC40 index decreased by -1.3% and 10-Year French German Government bond spreads widened by +5 bps to 86 bps. The euro exchange rate depreciated by -0.6% to EUR/USD 1.167, while other European major equity indices were broadly unperturbed by the renewed French political uncertainty (as of 15:00 EEST).
10-Year US Treasury bond yields decreased by -8 bps in September, with some further decline so far in October (-3 bps to 4.12%), following further indications of soft job creation and more dovish Fed expectations. Based on overnight index swaps, the Fed is expected to cut interest rates by 25 bps in each of the next two meetings by end-2025 are expected, at a target range of 3.50% - 3.75%.
According to the National Employment Report by ADP, the US private sector shed -32k jobs in September, following a reduction of -3k in August, versus a 12-month average of +96k and well below consensus estimates for +52k.
The official labor market report for September, originally due for October 3rd, has been postponed as the US Federal government entered (October 1st) a partial shutdown for the first time since early-2019. Economic effects will depend mainly on the duration of the shutdown and Administrations’ choices regarding which “non-essential” operations to be put on hold.
Having said that, recent US economic activity data have been stronger than expected. Real GDP growth in Q2:2025 was revised up by +0.5 pps to +3.8% qoq saar (+2.1% yoy) in the 3rd estimate, following -0.6% qoq saar in Q1:2025. Private consumption (c.70% of US GDP) accounted for the bulk of the upward revision, with quarterly growth of +2.5% qoq saar instead of +1.6% qoq saar initially.