October 2025 proved to be a positive month for many investors, with markets reaching record highs. Read on to find out more about what factors may have affected your portfolio’s performance.
Remember to take a long-term view when assessing your investments and consider your risk profile when making decisions.
Markets experienced record highs, but investor uncertainty continued to have an effect
The month started strongly with the FTSE 100 closing at a record high on 1 October. AstraZeneca was the biggest riser, making the pharmaceutical firm the most valuable company listed in London.
In the year to 1 October, the FTSE 100 was up almost 15% and could be on track for its strongest year since 2009, when the market recovered from the financial crisis.
It was a similar picture in the wider European and US markets.
On 2 October, European shares hit a record high. The pan-European Stoxx 600 index increased by 0.7%, driven by gains in German and French companies. Wall Street also reached new heights when it opened, with the S&P 500 index up 0.3%.
Despite the promising start to the month, French stocks fell on 6 October. The market fell when new prime minister Sébastien Lecornu resigned after less than a month in office. The French index CAC 40 tumbled 1.8% as a result.
Signalling that investors may feel nervous, the price of gold surpassed $4,000 an ounce (£3,005) for the first time on 8 October. Gold is often viewed as a “safe” asset, and its price has increased by 50% in the first nine months of 2025.
The soaring price of gold is good news for mining companies. Antofagasta, which operates gold mines in Chile, was the biggest riser on the FTSE 100 after jumping 2.7%.
Trade tariff threats and actual tariff measures have caused market volatility throughout 2025, and October was no different. On 13 October, the US and China threatened to impose tariffs, which led to Asian stocks falling.
On 17 October, anxiety around US regional banks and credit concerns spooked the market. The US S&P 500 index was down 1.2%, and the ripple effect was felt in many other markets.
In the UK, the concerns sparked a sell-off that knocked nearly £11 billion off bank valuations. The FTSE 100 closed 0.87% down, with Barclays (-5.66%), NatWest (-2.88%), and HSBC (-2.5%) among the biggest losers.
There was a similar sell-off in Europe. The Stoxx 600 index (which includes UK banks) was down 2.4%, and around €37 billion was wiped off the value of the European banking sector.
The Asia-Pacific markets weren’t immune. China’s CSI 300 dropped 2.3% and Japan’s Nikkei fell 1%, although the dip in this region was partly attributed to investor caution over profits of AI shares.
Japanese markets quickly recovered on 21 October when Sanae Takaichi won a parliamentary vote to become the country’s first female prime minister. She is expected to push for looser fiscal policy.
The US announced new sanctions on Russia on 23 October, which pushed up the price of crude oil. This led to both BP and Shell shares rising by around 3.5% and the FTSE 100 reaching another record high.
The positive news continued on 24 October. The FTSE 100 broke the record set the previous day and exceeded 9,600 points for the first time. On the back of an inflation report, the US indices – the S&P 500 and the Nasdaq – also broke records.
In addition, Shanghai’s SSE Composite Index increased by 0.7% and reached its highest level in more than a decade. The boost was linked to Beijing stating it would focus on chips and AI to achieve technological self-reliance, which led to stocks in this sector rising.
UK
In the 12 months to September 2025, inflation was 3.8% – stubbornly remaining above the Bank of England’s 2% target.
The International Monetary Fund increased its 2025 UK inflation forecast to 3.4% (up from 3.1% in April), saying the UK was set to have the highest in the G7.
Official figures estimate UK GDP increased by just 0.1% in August. The report suggested there was no service growth, which may reflect business caution ahead of the upcoming Budget.
Data from the Office for National Statistics (ONS) shows the government borrowed £99.8 billion between April and September 2025. This is the largest sum borrowed since 2020 and is £7.2 billion more than the Office of Budget Responsibility forecast in March 2025. The news will add further pressure to the chancellor ahead of the Budget, which will take place on 26 November 2025.
Trade data released in October 2025 was also poor. According to the ONS, the trade deficit widened with exports to the US and EU falling by around £700 million and £800 million respectively in August 2025.
Readings from a Purchasing Managers’ Index (PMI) suggest that businesses may be taking a cautious approach in the lead-up to the Budget.
The S&P Global PMI found that sluggish demand led to a reading of 50.8 in September in the service sector. While the figure remains above the 50 mark that indicates growth, it’s a marked drop from the 54.2 recorded in August.
The manufacturing sector shrank at the fastest pace in five months as factories were affected by subdued domestic demand and falling export orders. The reading of 46.2, which indicates contraction, was also linked to a cyberattack on Jaguar Land Rover that halted production and disrupted supply chains.
Europe
In August, the euro area hit the European Central Bank’s inflation target of 2%. However, it increased to 2.2% in September.
S&P Global’s PMI, which tracks business activity, was positive. The eurozone private sector delivered a reading of 52.2 after rising at the fastest pace in 17 months. Businesses also recorded the strongest increase in new orders in two and a half years.
The EU’s two largest economies, Germany and France, reported sharply contrasting performances. Germany’s output growth reached a 29-month high. In contrast, France posted 14 consecutive months of decline amid political uncertainty.
While the PMI data suggests businesses are confident, unemployment figures released by Eurostat indicate many firms are being cautious. Across the eurozone, unemployment increased by 0.1% to 6.3% in August.
Highlighting the far-reaching impact of US trade tariffs, Switzerland cut its 2026 economic growth forecast to 0.9% against the 1.2% predicted in June 2025. The Swiss government noted that exports have been affected by tariffs, creating a ripple effect across the broader economy.
US
Inflation in the US in the 12 months to September 2025 was 3%. The figure is slightly lower than expected and could add to the pressure the Federal Reserve is already facing from the US president to cut interest rates.
PMI data for the US service sector fell to 54.2 in September but remained in growth territory.
However, a survey conducted by recruitment firm Challenger, Gray & Christmas suggests that business uncertainty may be causing firms to halt hiring plans. In the nine months to the end of September 2025, 205,000 fewer jobs were created when compared to the same period in 2024.
Asia
Takaichi, Japan’s new prime minister, could be welcome news for investors. She is expected to embrace government spending, lower interest rates, and adopt a looser approach to monetary policy than her predecessor. It’s hoped that this will encourage businesses to invest and support economic growth.
While China’s GDP growth of 4.8% year-on-year between July and September 2025 might seem high compared to other economies, it’s the slowest pace recorded in a year. In addition, hopes that the economy could reduce the impact of tariffs by moving away from exports to domestic consumption were tempered when retail figures remained weak.
Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
Investment values fluctuate and can go down as well as up (including any income generated from them); you may not get your initial capital back. Past performance is not a reliable indicator of future returns.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
