European and UK Equity Capital Markets Review October 2026

• Market returns diverged in October as September’s AI optimism faded and concerns over investment spending and prospective returns came to the fore. Bonds exhibited safe-haven characteristics over the month, with UK 10-year yields falling from 5.48% to 5.14% and US 10-year yields from 5.30% to 4.92%. Middle East supply concerns pushed Brent crude towards $118 a barrel, while European natural gas exceeded €100/MWh amid low storage and LNG supply pressures. The FTSE 100 rose 1.2%, benefiting from energy sector strength, while the FTSE 250 fell 0.3%. The FTSE AIM 100 and FTSE Small Cap declined 4.8% and 1.2%, respectively. In the US, technology weakness weighed on the S&P 500 and Nasdaq, which fell 0.9% and 5.3%, while the equal-weighted S&P 500 gained 4.9% as investors rotated into the wider market. The Russell 2000 rose 0.5%. European equities proved resilient despite political and fiscal uncertainty in France, with the STOXX 600 gaining 1.9%.
  
  
• AI optimism faded in October as investors shifted their focus towards monetisation and returns on substantial investment. Amazon disclosed quarterly capital expenditure of $77bn versus $59bn expected, prompting a 7% after-hours share price fall, while Meta fell 7% after raising its 2026 spending guidance to $135–145bn. Alphabet dropped 12.6% in one session, wiping around $500bn from its market value, as slower advertising growth and AI competition raised concerns over its core search business, while Intel fell 23% following a weak sales forecast. Investors increasingly prioritised free cash flow and funding discipline over AI growth, rewarding Oracle’s improved cash-flow outlook while questioning whether AI could undermine Alphabet’s core search advertising business. Concerns over financing costs and infrastructure constraints added to scrutiny of the investment cycle, prompting rotation towards the wider market, including consumer staples and utilities.
  
  
• The Budget was a focus for investors but largely amounted to tinkering, offering targeted support for households and smaller businesses while deferring tougher spending decisions. Measures were partly funded by a temporary increase in the bank tax surcharge from 3% to 6%. Fiscal headroom fell from £24bn to £15bn, while the OBR cut its 2027 growth forecast from 1.6% to 1.0%, reflecting the energy price shock. Investec remains more positive, forecasting 1.5% growth in both 2026 and 2027. Central-bank policy remained focused on persistent inflation and energy pressures, but the Fed and ECB opted to hold rates steady in October at 3.75–4.00% and 2.50%, respectively. Investec Economics views these as temporary pauses, forecasting 25bp hikes from both in December alongside UK increases in November and February, before cuts later in 2027 as energy pressures ease.
  
  
• Energy prices rose in October as renewed Middle East tensions heightened supply concerns. Brent crude gained 13.6% over the month, hitting a month high of nearly $118 a barrel, as tanker attacks in the Strait of Hormuz and reported Houthi attacks on Saudi oil facilities heightened fears of escalation. Precautionary buying and investor hedging kept prices elevated despite recovering crude flows. European natural gas exceeded €100/MWh, its highest level since 2022, amid disrupted LNG supplies, low storage levels and intense global competition for cargoes ahead of winter. Energy pressures are feeding through to inflation: US headline CPI rose to 3.7% in September from 3.4%, with gasoline prices up 9.1% month-on-month. UK headline inflation also increased, reaching 3.5% in September from 3.1% the prior month, while core inflation rose in both economies, indicating broader price pressures.
  
  
• In Europe, ECM issuance reached $142.3bn in the year to October, slightly below the 10-year YTD average but remaining well ahead of 2025. Schneider Electric raised €6bn to support its $22.6bn acquisition of US software company PTC, marking Europe’s largest accelerated bookbuild in more than a decade. In the UK, an active October saw $4.7bn raised across 27 deals, above October 2025’s $2.1bn across 19 deals, with notable front-footed primary equity issuance. Informa raised approximately £940m to part-fund its £2.24bn acquisition of Clarion Events, expanding its B2B events business. Landsec raised £500m to partly finance its acquisition of the Metrocentre and consolidate ownership of existing retail assets. Meanwhile, Pennon launched a £550m rights issue to support its expanded £3.6bn water infrastructure investment programme while maintaining sustainable gearing.
  
  
• UK IPO activity received a boost in October from African digital finance company Airtel Money’s $700m listing, London’s largest IPO in five years, valuing the business at $7.0bn. The offer was entirely secondary and attracted strong institutional demand, supported by an IFC cornerstone investment. Spanish mining business Abenojar Tungsten also raised $190m through an entirely primary London IPO, priced at the bottom of its range. Its mine is expected to begin production in Q1 2029, with the listing highlighting London’s appeal for specialist mining businesses. Internationally, Anthropic filed for a Nasdaq IPO in October, targeting a November debut at $1.4–2tn valuation and a raise of up to $100bn, potentially surpassing SpaceX as the largest IPO in history by proceeds.
  
  
• UK public M&A activity remains elevated, with 30 transactions above £200m announced over the last 12 months, representing £76bn in aggregate equity value at an average headline premium of 43%. October saw two all-cash offers across the consumer and energy sectors: Ember Infrastructure’s £505m offer for Ashtead Technology at an 80.9% premium, and the CMC Group–Asterion consortium’s offer for Mobico at a 55.1% premium. Investec acted as financial adviser to Gooch & Housego on its £346m acquisition by Arlington Capital Partners at a 40.7% premium. These transactions highlight the valuation opportunities UK equities offer strategic and private equity buyers. Some of the resulting cash proceeds are likely to be reinvested in UK-listed companies, supporting future ECM activity.
   

• Equity markets entered 2026 strongly before conflict in the Middle East triggered a sharp sell-off in March and early April. Markets recovered through May and June and remained broadly resilient over the summer and into September. October experienced a greater degree of volatility, sector and stock rotation and divergence in performance across markets.
• AI dominated October as big tech results raised concerns over returns on substantial spending. Amazon’s quarterly capital expenditure exceeded expectations, while Meta raised its spending guidance; both saw their shares fall 7%. Investors rotated into the wider market and sought safety in government bonds, pushing yields lower, although political and fiscal uncertainty pushed French borrowing costs higher.
• Energy prices remained elevated amid Middle East tensions, with Brent crude trading as high as almost $118 a barrel and European natural gas exceeding €100/MWh for the first time since 2022, adding to inflation concerns.
• In October, the FTSE 250 fell 0.3%, taking its YTD gain to 8.8%, while the FTSE 100 rose 1.2%, leaving it up 8.0% YTD. The FTSE AIM 100 and FTSE Small Cap fell 4.8% and 1.2%, respectively. Elsewhere, the STOXX 600 rose 1.9%, while the S&P 500 and Nasdaq fell 0.9% and 5.3%, respectively; the Russell 2000 gained 0.5%.
   

• The UK’s valuation discount to the US has narrowed from 39% in January to 35% in October, narrowing further since September as AI concerns weighed on US valuations. The S&P 500’s forward P/E multiple has contracted 17% YTD to 18.4x as of 30th October amid strong earnings growth.
• Despite some improvement, UK equities remain attractively valued relative to global peers, with both the FTSE 100 and FTSE 250 trading on lower earnings multiples than European and US indices. US valuations are also towards the lower end of their five-year range following the AI-driven sell-off.
• Strong earnings growth across all regions (as opposed to multiple expansion) has, and is expected to continue to provide some level of support equity market performance.
   

• Inflation rose across major economies in September (released in October) on the back of surging energy prices. UK CPI climbed to 3.5% from 3.1% in August, US CPI rose to 3.7% from 3.4%, and Eurozone inflation accelerated to 3.8% from 3.2%. Core inflation also edged up to 2.8% in the UK and 2.6% in the US.
• In the UK, Chancellor John Healey’s Autumn Budget offered targeted support for households and smaller businesses facing high energy costs, while deferring tougher spending decisions. Energy payments, frozen fuel duties and business rates relief were partly funded by higher taxes on banks, property and savings income. Fiscal headroom narrowed and the OBR lowered its growth outlook for next year, although Investec remains more positive, forecasting 1.5% growth in both 2026 and 2027.
• As expected, the Fed and ECB held rates in October in spite of persistent above target inflation. The Fed maintained its 3.75–4.00% range, with two members favouring a 25bp hike, while the ECB held at 2.50% to assess the energy shock. Markets expect a 25bp BoE hike in November. 

• European growth optimism eased in October, with a net 22% of respondents in the October BAML fund manager survey expecting stronger growth versus 39% in September, although net 94% expect no recession, up from 86%. Meanwhile, 66% expect interest rates to remain higher for longer, up from 61%.
• Investors remained bullish despite softer growth expectations, with technology exposure reaching its highest since August 2020 at a net 37% overweight. Cash held steady at 3.9%, while a disorderly rise in bond yields overtook an AI bubble as the leading tail risk. As per the October BAML fund manager survey a yield approaching 6% for US 10 year Treasuries would prompt a more material shift from equities to bonds.
• Spain became Europe’s preferred equity market at net 28% overweight, its highest since May 2018, followed by Germany and Switzerland (16% each). France remained least favoured at a record net 56% underweight with 63% citing its fiscal sustainability and 2027 elections as Europe’s largest political risk. UK sentiment improved from modest underweight to neutral.
   

IPO issuance in Europe

• $1,702m raised from 10 IPOs in October 2026 across Europe, with an average deal size of $170.2m, a significant increase on September ($68m). There were 7 IPOs greater than $25m, and 4 IPOs greater than $100m including mobile payments provider Airtel Money ($700m), Finnish anti-drone technology company Sensofusion Oyj ($355m), Greek shipping company Capital Maritime Finance Corp ($336m) and Spanish tungsten mine developer Abenojar Tungsten SA ($190m).
• In 2026 YTD, 54 IPOs above $50m have raised $13.7bn, with an average issue size of $254m, versus 41 IPOs raising $16.3bn (average $398m) in 2025 and 40 IPOs raising $17.0bn (average $425m) in 2024.
• Aftermarket performance of European IPOs remains mixed, with the majority in positive territory and the average return firmly positive at 7.1% despite some material fallers.
• European IPO activity remains below 10-year averages, but Airtel Money’s debut, London’s largest IPO in five years, should encourage further activity. The medium-term pipeline remains healthy, with several flagship assets preparing and monitoring market conditions for execution windows.