European and UK Equity Capital Markets Review October 2025

• Global equity markets continued to make solid progress over October with the Stoxx600 up 2.5%, S&P500 up 2.3%, Nasdaq 4.7% and the Nikkei 16.6%. Despite investor concerns with respect to the UK November Budget, better than expected inflation data and rising expectations over near-term rate cuts saw the UK indices rally well, with the FTSE 100 finishing the month up 3.9%. The FTSE 250 rose 0.7%. Over the month investors have increasingly cited the valuation of AI related stocks as presenting the greatest tail risk for markets and private credit the most likely source of an adverse credit event – such concern did not prevent Nvidia becoming the first company in history to reach a $5tn market cap on 29th October.
  
  
• Gold continued its rally into October as investors sought safe haven assets (in response to $ and US Debt / Governance concerns), reaching an intra month high of $4,400, aided by retail buying momentum. Escalated trade tensions between the US and China also contributed to this price increase, but improving rhetoric from the two countries and a trade deal helped to ease market concerns towards the end of the month. It was noticeable the relatively limited impact those trade concerns had on equity markets (TACO…). Whilst volatility was relatively muted for much of the month, volatility hit an intra month high of 28.3 (on 16th October) over concerns for US regional banks’ exposure to auto-loan credit.
  
  
• The UK had multiple solid data readings over the month, with improving consumer confidence, encouraging retail sales data and better than expected PMI data. Whilst concerns remain over the contents of the UK Budget and the size of the fiscal black hole, there is scope for investors to build on an improving outlook for the UK, not least with c.3 rate cuts expected for next year. Coupled with low valuations, particularly versus the US, investors continue to see the attractiveness of the UK, which was echoed in this month’s performance.
  
  
• Meanwhile in the US, the Fed cut rates by 25bp bringing the Fed funds target range to 3.75%-4.00%, a decision that was widely anticipated by the market. This Fed meeting was set against the backdrop of the second longest US government shutdown in history, with a dearth of official economic data complicating the decision making process. However it was Chair Powell's comments that a December cut was 'not a foregone conclusion, far from it' which markets took most notice of, the curve now prices in a 70% chance of a cut down from 90%. In addition to interest rate policy the Fed also announced the end of Quantitative Tightening (QT) in order to address recent volatility in funding markets.
  
  
• As the probability of a full trade war, particularly between the US and China, has faded and markets grow more accustomed to Trump policies, investors have become more optimistic on the global growth outlook, and particularly the US. In the latest BAML survey, growing expectations for monetary easing has improved investor confidence in the macroeconomic outlook with those forecasting a soft landing or no landing at 87% and only 8% seeing a hard landing as likely. Geographically, according to the survey, investors remain overweight EU stocks, but as the landscape in the US steadies, investors have closed their underweight positions.
  
  
• US CPI for September came in at 3.0%, which although a slight tick up relative to August (2.9%), was an undershoot relative to consensus (3.1%). Core inflation was also lower than expected, dipping to 3.0%, from 3.1% in August. Once again there were few concrete signs of a tariff effect. UK CPI data for September was more encouraging than was expected: instead of rising to 4.0% as consensus had expected, inflation held steady at 3.8%, as it has done since July. The core measure dipped to 3.5% (consensus: 3.7%). In the Eurozone 'flash' HICP inflation for October edged lower to 2.1% having risen to 2.2% in September. Meanwhile 'core' inflation held steady at 2.4%. Both readings were as expected.
  
  
• The continent benefitted from the pick up in IPO activity including the $4.2bn IPO for Verisure, $0.8bn for Ottobok and c.$1bn of IPO activity in the UK from Shawbrook, Princes Foods and The Beauty Tech Group. The pick up in ECM activity has shown that there is public equity capital available to support European businesses and provides for some qualified optimism that activity will continue to recover from the low points of the past few years as we head into 2026

• October was another strong month for equities, with the S&P500, Nasdaq and FTSE 100 all hitting record highs. US large cap tech continued to drive the US markets higher, evidenced by the monthly performance of the indices. The S&P500 closed up 2.3% whilst the S&P Equal Weighted closed down -1.0% and the tech heavy Nasdaq closed up 4.7%. A better than expected inflation print in the UK and positive economic data helped the FTSE All Share rally 3.5%. Investors’ concerns over the UK Budget saw the smaller, more domestically focused FTSE 250 climb just 0.7% in the month, whilst the FTSE AIM 100 closed down -1.5%.
• There was an increase in the VIX midway through October, driven by a resurgence of the US-China trade war, including threats by President Trump to impose a 100% tariff on top of existing levies. A few days later, there were concerns within the auto-loan credit market following the collapse of Tricolor and First Brands, amplified by comments from Jamie Dimon that these losses were like “cockroaches” and that more could emerge. By the end to the month the VIX had fallen back to 17.4.
• In the UK for October, the larger cap FTSE 100 outperformed its smaller cap counterparts, finishing the month up 3.9%, the FTSE 250 up 0.7%, the FTSE AIM100 down -1.5% and FTSE Small Cap up 1.9%. The blue chip index remains significantly ahead YTD. Elsewhere in October, the Stoxx600 was up 2.5%, S&P 500 up 2.3%, Nasdaq up 4.7% and Russell 2000 up 1.8%.

• 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.
• A large part of the valuation differential across geographies can be attributed to large cap Tech valuations. The Nasdaq 100 is currently trading at a P/E of c.30 versus longer term averages of c.27x (L5Y). As can be seen in the latest BAML fund manager survey concerns about AI driven Tech valuations is in the top ‘tail risk’ for investors in the month of October.
• 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 FTSE 250. Despite this improvement, as at the end of October, the FTSE All-Share still sits at a 43.7% discount to the S&P, and a 23.1% discount on an equal weighted basis (at a headline level).

• UK CPI remains ahead of other regions remaining at 3.8% y/y for September albeit lower than consensus calls for 4.0%. Service sector inflation remained at 4.7%. Core dipped to 3.5% from 3.6%, and below consensus for 3.7%.
• Eurozone inflation ticked down to 2.1% in October from 2.2%. Core held steady at 2.4%. In the US, CPI ticked up to 3.0% y/y in September from 2.9% in August, whilst core dipped to 3.0% from 3.1%.
• At the latest FOMC meeting, the Fed cut rates by 25bp, but was not unanimous in its decision. The Fed also announced an end to quantitative tightening from 1 December. It was noted in Powell’s speech that the balance of risks had shifted given the rising downside risks to the labour market. On plans around the balance sheet, Powell noted that in the last three weeks there had been a significant tightening in money markets and that provided a signal that it was the right time to announce a freeze to the size of the balance sheet to ensure that there was still ‘ample reserves’ in the system.
• The ECB maintained the Deposit rate at 2% noting that it felt monetary policy was well suited to the current economic environment. In the UK, the market is a little uncertain on the timing of the next cut by the BoE, with December 2025 and February 2026 in contention.

• The latest BAML survey showed investor sentiment rising to the most bullish since February however full bull sentiment has been tempered by growing concerns of a private credit event and an AI bubble.
• Investor sentiment rose to a 7-month high with a jump in growth expectations, a strong increase in equity allocation and reduction in cash levels driving the improved sentiment. Investors continue to remain cautious to the tail risks with an AI bubble viewed as the primary concern, followed by a second wave of inflation and a loss of Fed independence.
• The announcement of the Budget now set for the 26 November has introduced a couple of months of uncertainty to the UK market, in particular as investors focus on the challenges that 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

• S$6.5bn raised from 14 IPOs in October 2025 across Europe, with an average deal size of US$461m. There was 7 IPOs greater than US$50m including Swiss security services Verisure (US$4,176m), German prosthetics Ottobock (US$820m), British food and drink group Princes Group (US$526m), UK specialist lender Shawbrook (US$458m), and UK consumer tech Beauty Tech Group (US$143m).
• There were four IPOs over US$1bn in 2024, and three IPOs over US$1bn in 2025 with Verisure now the largest IPO of 2025 at US$4,176m, surpassing SMG’s IPO of US$1,136m (September 2025). This does not include Rosebank.
• So far in 2025, most core European IPOs have traded higher post issue with those pricing since April up 24.4% on average post pricing. This has provided investors with a positive return and created a constructive ‘feedback loop’ for those issuers looking to come to market over coming quarters.
• 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)}