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This week's headlines
- US Government shutdown drags on – Over 250,000 federal employees missed their scheduled paychecks this week, with a further two million at risk if the deadlock persists. Disruptions are already being felt: some unpaid air traffic controllers are calling in sick, causing flight delays. Economists warn each week of the shutdown could shave 0.1% off US GDP.
- Gaza ceasefire – Israel and Hamas agreed on terms for the release of all hostages held in Gaza. Under steps proposed by President Donald Trump, Israel would release nearly 2,000 Palestinian prisoners in return, potentially easing regional tensions.
- AMD and OpenAI forge multi-billion-dollar partnership – OpenAI, the ChatGPT maker, has partnered with Nvidia rival Advanced Micro Devices (AMD) to deploy tens of billions of dollars’ worth of its chips. The collaboration positions OpenAI as one of AMD’s largest shareholders and underscores the growing commercialisation of AI technology.
- New French Prime Minister – Emmanuel Macron is set to announce a new French Prime Minister, avoiding the need to call a snap election that would have deepened the political chaos. French bond yields spiked after the resignation of former PM Lecornu on Monday, pushing the premium over German bonds to a 9-month high.
- Fed cautious over US inflation – Minutes from the Federal Reserve’s (Fed’s) central bank’s September meetings reveal growing concern over persistent US inflation. The records show “a majority of participants emphasized upside risks to their outlooks for inflation”, highlighting the Fed’s careful approach to future rate decisions.
What this means for financial advisers and clients
For now, the US government shutdown hasn’t caused a materially detrimental effect on markets. Looking back at the most recent 2018 shutdown, which lasted over 30 days, it’s perhaps unsurprising that investors are relatively calm at this stage.
Meanwhile, the September Federal Open Market Committee minutes suggest the Fed plan to move cautiously on further rate cuts – assuming economic data continues to flow normally. So, it’s no surprise that investors are now fully pricing in a 0.25% US interest rate cut later this month.
Events in France once again show how political instability can ripple through bond markets. While both the US and the UK face their own well publicised political issues, this week at least are grateful that the spotlight is firmly on France. It once again reminds us of the importance of next month's UK Budget, which could have a material impact on the pound and UK bonds in either direction depending on how well it is received.
Chart of the week - The circular trade
Source: Bloomberg
Why this matters
This diagram above maps out the complex web of relationships in the AI ecosystem, particularly centred around OpenAI, Nvidia, and Microsoft. The circle sizes represent each company's market value, and the coloured arrows show the different types of relationships.
While markets have broadly performed well this year, the winners have somewhat been concentrated within a few sectors and themes. The AI theme has been the most prevalent, and the chart above illustrates how interconnected these firms are.
That interconnection also highlights a key risk: concentration. If the AI narrative were to lose momentum, the resulting downturn could be amplified, as these companies are often linked through investment flows, sales, and supply chains.
It’s easy to see why investors might be tempted to “FOMO” into the latest trend. But as we always remind advisers and their clients – diversification remains the best defence against everything going wrong at once.
The Markets
Choppy week for UK stocks
UK equities saw a mixed performance this week. Bank shares rose earlier in the week after the FCA revised its estimate lower for the overall cost of compensation tied to the car finance mis-selling scandal. But gains faded as several banks issued warnings that they may need to increase loss provisions. Supermarket stocks also came under pressure this week after Asda announced price cuts on 956 products by an average of 6%, sparking fears of renewed margin compression across the sector.
AI deals boost US stocks
Investor sentiment in US tech remained strong as artificial intelligence once again dominated headlines. The landmark partnership between OpenAI and AMD buoyed AI-linked stocks, helping offset the drag from the ongoing government shutdown. While the S&P 500 is only slightly up in dollar terms, UK investors benefitted from a stronger US dollar over the week.
Sacré bleu – French woe weighs on Europe
French equites tumbled 1.4% in a single session following the abrupt resignation of PM Lecornu. Elsewhere, the European Commission’s move to slash tariff-free steel import quotas kindled strength in steelmakers like ArcelorMittal and Thyssenkrupp.
Turmoil in Tokyo
Japan’s long-standing ruling coalition collapsed this week, creating early challenges for incoming Prime Minister Sanae Takaichi. The Yen fell by more than 3.5% against US Dollar this week, providing a boost to Japanese equities.
Gold record
Gold smashed through $4,000 an ounce for the first time, as concerns over the US economy and the government shutdown added fresh momentum to the blistering rally.
| | Weekly Change | YtD Change |
|---|---|---|
| FTSE 100 | 0.22% | 19.85% |
| FTSE 250 | -0.56% | 10.12% |
| S&P 500 | 1.35% | 8.32% |
| NASDAQ | 2.33% | 12.70% |
| FTSE Developed Europe Ex-UK | -0.28% | 21.62% |
| FTSE Emerging Markets | 1.26% | 18.48% |
| FTSE Japan | 1.58% | 15.02% |
| Brent Crude | 2.63% | -18.02% |
| Gold Spot | 3.29% | 43.14% |
| UK 10yr Gilt yield | +5bps | +18bps |
| US 10yr Treasury yield | +3bps | -42bps |
Source: FE FundInfo, goldprice.org, exchangerates.org.uk, investing.com and finance.yahoo.com. GBP returns as at close of business on Thursday 9th October 2025.
Stay tuned for next week’s market insights
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This article is for financial professionals only. Any information contained within is of a general nature and should not be construed as a form of personal recommendation or financial advice. Nor is the information to be considered an offer or solicitation to deal in any financial instrument or to engage in any investment service or activity. Parmenion accepts no duty of care or liability for loss arising from any person acting, or refraining from acting, as a result of any information contained within this article. All investment carries risk. The value of investments, and the income from them, can go down as well as up and investors may get back less than they put in. Past performance is not a reliable indicator of future returns.
