The Week in One Look
- Growth pulse improved. October flash PMIs pointed to faster expansion in the U.S. and Eurozone, with services leading and manufacturing stabilizing.
- Inflation picture mixed. UK CPI stayed elevated versus target, while Japan’s core CPI re-accelerated, keeping both central banks in the spotlight.
- U.S. labor steady. Weekly jobless claims ticked up modestly but remain historically low—consistent with a still-firm jobs backdrop.
United States: Activity Firms, Labor Still Resilient
Flash PMI (October): Services strengthened and manufacturing edged closer to neutral, lifting the composite gauge to a fresh multi-month high. That combination signals decent Q4 momentum without obvious overheating.
Jobless claims: Initial and continuing claims nudged higher week on week but remain in ranges that historically map to modest job growth, not contraction.
Market take: A firmer growth mix tends to support cyclicals and credit while nudging front-end yields higher. The dollar typically stays bid when the U.S. outpaces peers on activity.
Eurozone & Germany: Green Shoots Broaden
Eurozone flash PMI (October): The composite advanced again, marking the strongest expansion in well over a year. Services did the heavy lifting; manufacturing showed early stabilization as new orders improved.
Germany flash PMI (October): Germany’s composite climbed to a two-year high, with services robust and factory output less negative. The direction of travel is improving even if hiring and forward-looking components remain cautious.
Market take: Better PMIs support European equities, especially domestically geared and services-exposed groups, while leaning against aggressive ECB easing expectations if momentum holds.
United Kingdom: CPI Still Too High for Comfort
CPI (September): Headline inflation held around the high-3% handle year over year, well above the 2% target. Core and services inflation cooled only slowly, underscoring the UK’s sticky price dynamics.
Policy read-through: The BoE can delay, not rush, its easing path. Rate-sensitive UK sectors—homebuilders, REITs, discretionary names—will key off the next two CPI prints for confirmation of a durable downtrend.
Japan: Core Inflation Re-Accelerates, BOJ Back in Focus
National CPI (September): Core inflation re-accelerated toward 3%, with core-core remaining close to that level. Underlying pressures—wages, services, and pass-through from prior input costs—kept inflation above the BoJ’s target.
Policy read-through: A hotter CPI keeps incremental tightening on the table into the late-October policy meeting. Rising local yields typically benefit financials and can temper persistent yen weakness if guidance turns less dovish.
What It Means for Markets
- Soft-landing bias strengthened. Rising PMIs with contained—but not collapsing—labor data argue for resilient growth rather than an imminent downturn.
- Rates path: fewer, later cuts. Stickier UK inflation and firmer global activity push back aggressive easing bets in gilts and, at the margin, the front end elsewhere.
- FX: USD resilience, selective EUR tailwinds. A U.S. growth edge supports the dollar, while improving Eurozone PMIs can offer support to the euro if confirmed by hard data.
- Equities playbook: Prefer quality cyclicals, services-exposed winners, and European domestics on improving survey data. In Japan, a steeper curve supports banks/insurers.
Key Data at a Glance
- U.S. Composite PMI (flash Oct): Multi-month high; services > manufacturing.
- Eurozone Composite PMI (flash Oct): Highest in ~17 months; breadth improving.
- Germany Composite PMI (flash Oct): Highest in ~2 years; services-led.
- UK CPI (Sep): ~3.8% YoY; core easing slowly.
- Japan Core CPI (Sep): ~2.9% YoY; core-core near ~3.0%.
- U.S. jobless claims (latest week): Slight uptick; historically low.
Positioning Ideas (Not Investment Advice)
- U.S.: Tilt toward industrials, travel & leisure, and quality small/mid-caps leveraged to services demand; keep duration modest if front-end reprices.
- Eurozone: Domestic cyclicals and financials benefit if surveys keep improving; watch earnings revisions for confirmation.
- UK: Rate-sensitive plays need clearer disinflation; barbell income (defensives) with selective cyclicals.
- Japan: Banks/insurers on a steeper curve; exporters sensitive to any yen stabilization should be sized carefully.
FAQ
Why do flash PMIs matter so much?
They’re among the earliest monthly reads on growth, often setting the tone for earnings revisions, rate expectations, and sector leadership.
Does steady UK inflation mean more hikes?
Not necessarily. It complicates the timing of cuts rather than forcing immediate hikes—unless services inflation re-accelerates.
Is Japan really exiting ultra-easy policy?
The latest CPI keeps the door open to incremental tightening, but the BoJ wants proof of sustained wage-price dynamics. Any shift is likely gradual.
How should equity investors react to firmer PMIs?
Historically, improving surveys favor cyclicals, financials, and services-centric businesses, while long-duration, rate-sensitive trades can lag if yields creep up.
Disclaimer
This article is for informational and educational purposes only and does not constitute investment advice, an offer, or a solicitation to buy or sell any security. Investing involves risk, including possible loss of principal. All views reflect data available for October 20–24, 2025 and are subject to change without notice.
