Market snapshot: stocks bounce back

Stock markets recovered some poise late Friday and into Monday, with the FTSE 100 starting the week on the front foot. ii's head of markets explains what's driving sentiment.

20th October 2025 08:23

by Richard Hunter from interactive investor

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US markets ended Friday on a firmer footing and closed higher for the week, despite Thursday’s sell-off which had threatened to disrupt momentum.

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The government shutdown and stretched technology valuations are still close to the surface, but softening noises from the White House on the spat with China and a more sanguine reading of the regional banking concerns helped allay some investor concerns. The threat of additional 100% tariffs on China from 1 November appeared to evaporate as the President said that the imminent meeting with his counterpart was still likely and that the proposed tariffs were in any event unsustainable.

Meanwhile, the fact that the banks had revealed a strong earnings quarter came back to dominate, as shares staged something of a recovery after the declines of the previous day. Investors increasingly decided that the declared regional losses were isolated as opposed to the thin end of a concerning wedge.

The coming week will herald a slew of third-quarter updates, which will help to shed light on the current state of the economy, especially in view of the data vacuum which the shutdown has brought. Results from the likes of Coca-Cola Co (NYSE:KO), General Motors Co (NYSE:GM), AT&T Inc (NYSE:T), International Business Machines Corp (NYSE:IBM), Ford Motor Co (NYSE:F) and Intel Corp (NASDAQ:INTC) are due, while the “Magnificent Seven” will be represented by both Netflix Inc (NASDAQ:NFLX) and Tesla Inc (NASDAQ:TSLA). Expectations are high, with 16% earnings growth expected across S&P500 constituents, although this also brings the danger of any disappointments resulting in sharp share price declines.

In the meantime, the main indices resumed their upward trend, not that the volatility and general skittishness are likely to disappear any time soon. In the year to date, the Dow Jones has added 8.6%, while the more technology focused S&P500 and Nasdaq are ahead by 13.3% and 17.4% respectively.

The relief spilled over into Asian markets, which had the additional boost of more positive domestic news. The Nikkei 225 jumped to a new record as the likely coalition government would be seen as equity positive, including a pro-stimulus and anti-interest rate hiking stance.

Chinese markets also looked through a slew of mixed economic news, including 1.1% growth in the third quarter, annualised to 4.8% as expected. Industrial output was also positive and retail sales in line, although there clearly remains work to do across the beleaguered property sector, with weak home prices failing to improve the outlook.

The FTSE100 also rebounded after a bruising session at the end of last week, despite a read-across markdown to the likes of Marks & Spencer Group (LSE:MKS) and Primark owner Associated British Foods (LSE:ABF) after an earnings downgrade from FTSE250 and ex-FTSE100 retailer B&M European Value Retail SA (LSE:BME).

Defence stocks resumed their bullish trend as the situation in Gaza remains on tenterhooks, while the news emanating from China was enough to lift stocks with a large exposure to the region, such as Standard Chartered (LSE:STAN), HSBC Holdings (LSE:HSBA) and Prudential (LSE:PRU). The rebound puts the FTSE100 back on track and now ahead by 15% so far this year.

More generally, the banks also recovered some poise after the most recent blip and ahead of the quarterly earnings season which this week brings updates from Barclays (LSE:BARC), Lloyds Banking Group (LSE:LLOY) and NatWest Group (LSE:NWG). Expectations are high, with the prodigious cash generating ability of the banks, allied closely to strong shareholder returns and stable capital cushions having attracted investors in their droves this year. The economic calendar is also busy with releases including retail sales and inflation, both being closely watched by the Bank of England, topping the agenda.

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