20 October 2026
The UK economy grew 0.1% in August from July, against expectations of a 0.1% decline, with production up 0.8%, services flat and construction down 0.2%, leaving the month's Gross Domestic Product ("GDP") growth resting on one sector. The trade deficit narrowed to £920 million from £2.32 billion in July. Consumer evidence was softer, with the British Retail Consortium reporting retail sales up 1.3% in September on an annual basis, slowing from 2.3% a year earlier as households braced for higher bills and taxes. Ahead of the budget on 28th October, the Institute for Fiscal Studies said higher inflation would erode departmental spending power. The 10-year gilt yield fell 7 basis points to 5.37%.
Oil set the tone for UK equities, with Brent Crude holding near $105 a barrel, as strikes in the Middle East, renewed Houthi attacks on Saudi infrastructure and disruption around the Strait of Hormuz kept supply at risk. Oil major BP said stronger refining margins would add between $1.9 billion to $2.1 billion to third quarter profit, against impairments of up to $4.5 billion. UK equities also benefited from their defensive profile, as evolving interest rate expectations spurred a rotation out of artificial intelligence (“AI”) linked stocks. The FTSE 100, where energy carries heavy weight, led the major markets, while the FTSE 250 of smaller companies rose to a lesser extent.
US inflation ran hotter than expected, the Consumer Price Index ("CPI") rising 3.7% for the year to September against consensus of 3.6% and 3.4% in August, with petrol prices up 9.1% on the month. Core CPI, which excludes food and energy, rose 2.6% from 2.4%. The Producer Price Index ("PPI") rose 6.3% for the year to September. Firmer inflation is hawkish, yet the implied probability of a rate rise at the October Federal Reserve meeting held at roughly 17%. The 10-year Treasury yield fell 16 basis points to 5.08% as a sell-off in AI-related shares drove demand for government bonds. The Nasdaq Composite fell, whilst the Dow Jones Industrial Average ended higher, as money rotated towards value shares.
Spanish consumer price inflation was confirmed at 4.9% for the year to September, with core inflation at 3.1%, and French inflation revised up to 3.1% on higher energy prices. Eurozone industrial production fell 0.5% in August from July, a third consecutive decline, pointing to manufacturing still shrinking while costs stay high, with natural gas prices elevated on the prospect of further action against Iran. European equities rose even as the reporting season began, with the German, French and Swiss markets all gaining.
Japanese shares fell over a holiday-shortened week. Corporate goods prices rose 6.8% for the year to September, below the 7.6% expected and slowing from 7.6% in August. Bank of Japan board member Junko Koeda cautioned against hesitating to raise interest rates and Governor Kazuo Ueda repeated concerns that underlying inflation could overshoot the 2% target, though most investors expect no change at the October meeting. The 10-year Japanese government bond yield fell to 2.94% from 3.01%. In equities, selling concentrated in semiconductor and AI-related shares, which carry heavy index weight.
Autotrader is the UK's largest digital automotive marketplace, connecting vehicle buyers with regional retailers. Over the past week, the company’s shares listed in London climbed 11.7% to close at 546p on Friday. This solid performance was primarily driven by a global rotation of capital into defensive value options following the AI trade unwind. The move showcased renewed investor confidence. The stock's upward momentum was further amplified by management's aggressive 4.43 million share buyback programme.
JD Sports Fashion is a leading UK-based global multichannel retailer of sports fashion, footwear and outdoor brands. The company's shares rose 11%, ending the week at 93.78p, driven by strong technical momentum and broader cyclical sector catch up rather than specific fundamental news or events. During the week, the stock experienced a steady climb, advancing sharply by 4.3% on Thursday to break above its 200-day moving average, which attracted momentum-driven buyers. Concurrently, with no structural macroeconomic rotations from the US to benefit the UK, the only corporate development was a neutral board director resignation announcement made on Friday.
Antofagasta, a Chilean-focused copper mining company, experienced a 9.8% decline in its stock price this past week, closing at £34 per share. The drop was largely driven by a massive investor sell-off on Thursday following a disappointing third quarter production report. In sluggish broader market conditions, the company issued flat 2027 production guidance of 630,000 to 690,000 tonnes and reported that 2026 cash costs will rise by 10 US cents to $2.70. Management noted ongoing strike disruptions at the Centinela mine, located in the Atacama Desert of northern Chile, prompting City analysts to highlight that fourth quarter output must jump by 34% to hit their full year copper production targets.
Market Commentary prepared by Walker Crips Investment Management Limited.
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No news or research content is a recommendation to deal. It is important to remember that the value of investments and the income from them can go down as well as up, so you could get back less than you invest. If you have any doubts about the suitability of any investment for your circumstances, you should contact your financial advisor.
The value of investments can fall as well as rise. Investors may get back less than invested. Past performance is not a reliable indicator of future results.
The value of investments can fall as well as rise. Investors may get back less than invested.
