European and UK Equity Capital Markets Review August 2025

• Equity markets continued to rally over the course of August with a Bank of England rate cut and weaker US economic data increasing expectations of a Fed cut in September helping push markets higher. The FTSE100, DAX, S&P500 and Nasdaq hit new all time record highs over the month, although early September trading has been softer as investors have grown more concerned about potential threats to Fed independence and broader macro concerns with respect to government funding impacting longer term bond yields around the globe.
  
  
• Equity markets around the globe have performed well so far in 2025, with outperformance skewed to larger caps. European indices have largely outperformed their US counterparts although US indices have significantly closed the gap over the past few months with large cap tech a core part of that ‘catch up’. The US mid / small cap Russell 2000 index has underperformed quite markedly for much of 2025, but growing expectation of a Fed rate cut later this month helped fuel a c.7% rally in US smaller caps over August. YTD in the UK the FTSE is up 12.4%, the FTSE250 is up 4.8%. In Continental Europe the IBEX is up 28.8%, the DAX up 20.1% and the Stoxx600 up 8.4%. The underperformer in Europe has been the CAC where French political challenges have taken their toll.
  
  
• Investors’ focus on US tariffs diminished over August after President Trump unveiled updated tariff raises early in the month, even with court challenges to the legality of the basis for most tariffs remaining. However there has been increasing concern about President Trump’s continued attacks on the Fed and certain FOMC members – many economists and strategists are warning of difficult consequences for the USD and for the appeal of Treasuries if the Fed’s independence is seen as ‘compromised’.
  
  
• Weakening US labour market data has provided the market with growing confidence that US policy rates will be cut again sooner rather than later – US non-farm payrolls rose by just 73k in July, but it was the combined 258k of downward revisions to the two previous months that captured the markets’ attention, marking the largest downward revision ex-pandemic. It was also noted in Fed Chair Powell’s comments at Jackson Hole that the downside risks to employment are rising – as such the market is currently ascribing a c.95% probability to a 25bp cut at the Fed meeting on 17 September.
  
  
• Macro releases in August included UK CPI inflation data that rose year-on-year in July coming in at 3.8% from 3.6% in June. Meanwhile in the US and the Eurozone, inflation remained steady at 2.7% and 2.0%, respectively. In the UK, domestic concerns surrounding the Autumn Budget are growing with the date now set for a late budget date of 26 November. Despite strong GDP growth at the beginning of the year, the prospect of further tax rises and limited confidence in the government’s ability to cut spending saw government long-term borrowing costs hit the highest level since 1998, with the yield on the 30-year gilt rising to an intraday high of 5.75% on 3 September. Outside the UK, the trend in longer-dated yields has also been up.
  
  
• Strong performance in equity markets YTD has aided a pickup in ECM activity although in Europe we are yet to see a consistency to the recovery in IPO markets – as is typical for the summer months, the holiday season saw a drop in ECM activity. Despite “Liberation Day” and the significant impact on April and May’s activity, European ECM volumes for the year are now marginally ahead of the corresponding period in 2024 by deal value, $82.1bn (2024) vs $84.2bn (2025), and in-line by number of deals 209 (2024) vs 208 (2025) – this is reflective of the strong activity at the beginning of the year and June/July.
  
  
• There was $8.0bn of European ECM activity in August including a $621m secondary ABB by UBS and $578m primary ABB by Gas Natural Fenosa. In the UK, Oxford Biomedica carried out a $81m primary ABB. There was one notable European IPO in August, Real Estate Investment Trust DMLKT in Tukey which raised $578m. Most 2025 IPOs have performed well in the aftermarket although there have been a handful of disappointments (Hacksaw and HBX Group).
  
  
• Investec have continued to be active in global ECM markets in 2025. Investec were Sponsor and Joint Bookrunner on the $183m intraday ABB for Hammerson plc which is dual listed on the LSE and JSE. Investec was also Joint Global Coordinator on the $1.5bn ABB of Pepkor on behalf of selling shareholder Ibex. This continues our strong momentum from June where we were Joint Global Coordinator, Joint Broker, NOMAD and Financial Adviser for Rosebank on their £1.14bn ABB. As such Investec has led the largest M&A related primary ABB in the UK market in the last 10 years, the largest ABB in SA over the last 10 years, and the only dual listed raise between the UK and SA this year.
   

• August was another positive month for global equity markets and most European equity markets continue to outperform their US peers YTD, albeit the ‘gap’ has narrowed over the course of July and August. At the headline level, a pivot back into US equities relative to earlier in the year has pushed US indices higher, although at the core of that re-balancing was large cap US tech, driven by the evolving AI thematic. It is noteworthy that the S&P Equal-Weighted performance clearly lags and that the top 10 stocks in the S&P500 now make up 40% of the market capitalisation of the index.
• As markets have grown more confident of a Fed rate cut in September, the highly correlated Russell 2000 rallied hard after a weaker start to the year and is now firmly in the green YTD.
• Whilst headlines continue to be dominated by President Trump’s policy agenda, volatility has continued to subside since the peak in the days following ‘Liberation Day’. The VIX moved from 16.8 to 15.4 over the course of the month, with a mild tick up in early September.
• In the UK for August, the larger cap FTSE 100 outperformed its smaller cap counterparts finishing the month up 0.6%, vs the FTSE 250 which finished down 1.6%, as investors have grown more nervous about the impact of government policy on the country’s economic prospects. The blue chip index remains ahead YTD. Elsewhere in August, the Stoxx600 was up 0.7%, S&P 500 up 1.9%, Nasdaq up 1.6% and Russell 2000 up 7.0%.

• The recent rally in the US has seen US equity valuations recover, driven by a strong performance of Big Tech, widening the gap with Europe. The headline valuation differential between US and UK / EU equity markets remains significant, however after adjusting for growth (and sector skew therefore...) that differential significantly reduces.
• Whilst UK equity market valuations do trail those in the US, adjusting for growth it is arguably down to fewer higher growth opportunities rather than an inability to value growth that drives the differential.
• Following the fallout from ‘Liberation Day’, global investors’ views and exposure to the US continue to evolve, with some reducing overall exposure to US equities. Whilst investors remain underweight US equities relative to history, over the summer investors continued to partially reverse some of their pivot away from US equities particularly as it relates to the technology sector.
• The solid performance of the FTSE over 2025 has started to close the valuation gap to US markets, but there is still a long way to go particularly for the FTSE250. Despite this improvement, as at the end of August, the FTSE All-Share still sits at a 42.2% discount to the S&P, and a 24.9% discount on an equal weighted basis (at a headline level).

• UK inflation remains ahead of other regions and for July rose to 3.8% y/y from 3.6% in June exceeding consensus estimates of 3.7%. Service sector inflation rose to 5.0% from 4.7%. Core also ticked higher to 3.8% from 3.7%.
• Eurozone CPI inflation data for August rose slightly to 2.1% but the core rate held steady at 2.3%. In the US, CPI remained at 2.7% y/y in July, a touch below consensus of 2.8%, but core rose to 3.1%, a touch above consensus of 3.0%.
• At the Jackson Hole Symposium, Fed Chair Powell noted that the downside risks to unemployment are rising, while near-term risks to inflation are to the upside, particularly due to tariffs. Following a weaker job report at the beginning August, with downward revisions to the payroll data for both May and June, markets are confident of a rate cut in September and are currently expecting 2-3 rate cuts by the end of 2025.
• The ECB has maintained the current level of rates since its cut in June. In the UK, the MPC had to hold two rounds of voting, for the first time since the MPC was created 28 years ago, but eventually cut rates by 25bp to 4.0%. The market is currently pricing in no further rate cuts in the Eurozone this year nor for the UK.

• Recession expectations have continued to fall, and an increased number of investors are expecting a “soft landing”, with 68% of those surveyed in the BAML investor survey expecting a soft landing versus 65% in July and 37% at peak Liberation Day concerns.
• Whilst a net 41% of investors covered in the BAML survey think that the global economy is set to weaken over the coming year, a net 35% expect stronger European growth over the coming 12 months. German fiscal stimulus is expected to be the main catalyst for the geography. Whilst fund managers continue to be overweight Europe versus historic levels, there has been some positioning back into US as concerns grow over European political headwinds and earnings growth.
• Whilst the UK continues to be viewed favourably, particularly given the country’s exposure to the banking, insurance and utilities sector – the sectors most overweight by investors – challenges remain for the UK Government as it strives to stimulate growth whilst operating close to the limits of its fiscal rules.

IPO issuance in Europe

• US$570m raised from four IPOs in August 2025 across Europe, with an average deal size of US$142m. There was one IPO greater than US$50m – DMLKT a Turkish Real Estate Investment Trust which IPO’d with a deal value of US$526m.
• There were four IPOs over US$1bn in 2024, with Asker Healthcare (March 2025) the largest IPO of 2025 at US$1,019m, surpassing HBX Group’s (February 2025) IPO of US$774m.
• Recent volatility has pushed a number of potential IPO launches from H125 into Q425 / H126.
• In the UK, IPO volumes are expected to recover with the pipeline building for 2026; the two UK IPOs (greater than $50m) that have priced so far in 2025 have both traded well in the aftermarket, with MHA up 37.0 % from issue price. We continue to think that the FCA Listing Rule reforms will be helpful tailwinds for UK IPOs.
• Changes to the FTSE UK Index Series will heighten the attraction of a UK listing, allowing non-sterling denominated securities index inclusion, and a faster entry threshold for larger companies (market capitalisation greater than £1bn and market position greater than 225th).

Selected Deals

^{Source: Company announcements; FactSet; Practical Law
Note: Scorecard includes competing offers and withdrawn of companies subject to the Takeover Code quoted on AIM or the Main Market. Formal sales processes are not included unless a buyer has been identified. Only newly announced offers in the month are included in the  count (i.e. possible offers announced in December 2025 will be included in that month even if it becomes a firm offer in January 2025)}