Global Economy & Markets, Weekly Roundup 18/11/25
Caution over elevated AI equity valuations dominates recent sessions
Global markets traded sideways, with volatility driven by concerns over stretched valuations in the Artificial Intelligence theme. The S&P 500 ended the week broadly flat, while the EuroStoxx index advanced +2.2% wow. Both indices, however, started the current week in negative territory.
Attention now turns to results from Nvidia (7.7% of S&P500’s market cap), the major bellwether regarding the AI investment theme, due to report on November 19th. Consensus analysts’ estimates call for EPS of $1.25 versus $0.81 a year ago (+54%).
Government bond yields edged modestly higher. UK Gilts underperformed, with the 10-year yield climbing +11bps wow to 4.58% -- one-month high -- amid speculation that the Autumn Budget (Nov. 26th) may scrap planned income tax hikes. That raised questions about fiscal consolidation. IMF projects the UK general government deficit narrowing to -4.3% of GDP in 2025 from -5.7% in 2024.
The US federal government fully reopened on November 13 after a record 43-day partial shutdown. Funding for most departments is secured through FY2026 (September 2026), while some programs -- such as enhanced healthcare subsidies -- remain funded only until end January 2026, leaving risk of new political tensions thereafter.
The Congressional Budget Office estimates Q4 GDP growth will be reduced by -1.5% annualized due to lack of compensation for furloughed workers weighing on consumption, as well as on account of fewer federal services provided and of less federal spending on goods and services.
However, a back pay regarding the shutdown period for previously furloughed workers and resumed operations, should offset most product losses, with CBO estimating a positive effect of +2.2% in the annualized quarterly growth of real GDP in Q1:2026.
At the same time, the restoration of official dataflow is highly anticipated. The September labor report (due on November 20th) is expected to show modest payroll gains (+50k vs +22k prior), with the unemployment rate steady at 4.3%.
Data visibility will be also critical for monetary policy. Hawkish tones from Schmid (FOMC voting member), Hammack, and Logan last week tempered expectations for a December interest rate cut, pushing the 2-Year UST yields +6 bps higher to 3.61% (10-year UST yields: +6 bps to 4.15%). However, Waller’s remarks on Nov 17 signaled support for an interest rate cut, leaving market pricing according to option implied expectations roughly split for the December10th meeting.
In Germany, the Council of Economic Experts (CEE) revised its forecasts modestly, projecting GDP growth of +0.2% in 2025 and +0.9% in 2026, supported mainly by higher government spending. Overall, though, the CEE incorporates only a small positive impact from the Special Fund for Infrastructure and Climate Neutrality (SFICN) of EUR 500 bn, given that up to now, it is used mainly for budget reallocations and consumption expenditures.
At the same time, the European Commission (Autumn Forecasts, November 2025) foresees German real GDP growth of +0.2% in 2025 and +1.2% in 2026 with the primary (overall) balance deteriorating to -2.8% (-4.0%) of GDP in 2026 from -1.9% (-3.1%) in 2025.
Global markets traded sideways, with volatility driven by concerns over stretched valuations in the Artificial Intelligence theme. The S&P 500 ended the week broadly flat, while the EuroStoxx index advanced +2.2% wow. Both indices, however, started the current week in negative territory.
Attention now turns to results from Nvidia (7.7% of S&P500’s market cap), the major bellwether regarding the AI investment theme, due to report on November 19th. Consensus analysts’ estimates call for EPS of $1.25 versus $0.81 a year ago (+54%).
Government bond yields edged modestly higher. UK Gilts underperformed, with the 10-year yield climbing +11bps wow to 4.58% -- one-month high -- amid speculation that the Autumn Budget (Nov. 26th) may scrap planned income tax hikes. That raised questions about fiscal consolidation. IMF projects the UK general government deficit narrowing to -4.3% of GDP in 2025 from -5.7% in 2024.
The US federal government fully reopened on November 13 after a record 43-day partial shutdown. Funding for most departments is secured through FY2026 (September 2026), while some programs -- such as enhanced healthcare subsidies -- remain funded only until end January 2026, leaving risk of new political tensions thereafter.
The Congressional Budget Office estimates Q4 GDP growth will be reduced by -1.5% annualized due to lack of compensation for furloughed workers weighing on consumption, as well as on account of fewer federal services provided and of less federal spending on goods and services.
However, a back pay regarding the shutdown period for previously furloughed workers and resumed operations, should offset most product losses, with CBO estimating a positive effect of +2.2% in the annualized quarterly growth of real GDP in Q1:2026.
At the same time, the restoration of official dataflow is highly anticipated. The September labor report (due on November 20th) is expected to show modest payroll gains (+50k vs +22k prior), with the unemployment rate steady at 4.3%.
Data visibility will be also critical for monetary policy. Hawkish tones from Schmid (FOMC voting member), Hammack, and Logan last week tempered expectations for a December interest rate cut, pushing the 2-Year UST yields +6 bps higher to 3.61% (10-year UST yields: +6 bps to 4.15%). However, Waller’s remarks on Nov 17 signaled support for an interest rate cut, leaving market pricing according to option implied expectations roughly split for the December10th meeting.
In Germany, the Council of Economic Experts (CEE) revised its forecasts modestly, projecting GDP growth of +0.2% in 2025 and +0.9% in 2026, supported mainly by higher government spending. Overall, though, the CEE incorporates only a small positive impact from the Special Fund for Infrastructure and Climate Neutrality (SFICN) of EUR 500 bn, given that up to now, it is used mainly for budget reallocations and consumption expenditures.
At the same time, the European Commission (Autumn Forecasts, November 2025) foresees German real GDP growth of +0.2% in 2025 and +1.2% in 2026 with the primary (overall) balance deteriorating to -2.8% (-4.0%) of GDP in 2026 from -1.9% (-3.1%) in 2025.