European and UK Equity Capital Markets Review September 2025

• Equity markets continued the positive momentum post the summer break, particularly for the US driven by a much anticipated Fed rate cut. Despite concern about threats to the Fed’s independence and still elevated longer term bond yields around the globe, partly due to high government funding needs, US equity markets have continued to rally strongly, particularly the rate sensitive Russell 2000. Any headline ‘US Risk’ has not to date been represented in equity markets but in the weakening of the US$ and the rally in Gold.
  
  
• In Europe, France’s political challenges and instability have had an impact on economic activity (Sept PMI data weak) as well as the yield on French Govt debt – the yield on OATS surpassed those of Greece and Italy in September. After a weak August and despite on-going political uncertainty French equity markets recovered in September rallying 2.5% over the month. Meanwhile in the UK, the looming budget update set for the 26th November has impacted economic activity (UK PMI weaker in Sept versus August) and investor sentiment with investors becoming more bearish on the UK in the near term. Persistently higher than target UK inflation also continues to weigh on the domestic indices, however, our Economists view the September print as the peak and expect a gradual return to the 2.0% target by 2027.
  
  
• According to the latest BAML survey, global portfolio managers are running a 7 month high overweight position in equities, despite 58% of investors believing stocks to be overvalued. Investors reduced their exposure to Europe, with the UK the primary loser given broader uncertainty with regard to the upcoming budget and money flowing to cover US shorts and add to US tech longs. As evidenced by the index performance YTD, US indices continue to be supported by the large tech names, with the S&P Equal Weighted underperforming the S&P500 by 5.4%.
  
  
• As very widely anticipated, the Fed cut rates by 25bp at the September Fed meeting. The new interim Governor Stephen Miran was the sole dissenter arguing for a 50bp cut. Surprisingly, the other previously more dovish FOMC members did not join him, despite the continued rhetoric from Trump regarding rate levels being too high and his calls for Cook to be fired. However, the FOMC statement itself downgraded its assessment of the jobs market, noting that ‘job gains have slowed and the unemployment rate has edged up’ – versus describing the labour market as ‘solid’ just two months ago.
  
  
• Macro releases in September included UK August CPI inflation data which remained at 3.8% yoy. Meanwhile in the US CPI inflation rose 0.2%pts to 2.9% whilst in the Eurozone inflation remained steady at 2.0% in August. Despite strong GDP growth at the beginning of the year for the UK, 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. Since then, 30y yields have trended down c.20bp.
  
  
• Strong performance in equity markets YTD has aided a pickup in ECM activity with US volumes up strongly YTD now back in line with the 10-year average by $ value and above by deal number. In Continental Europe, ECM volumes are continuing to recover with a pick up in IPOs this month. Meanwhile, in the UK the recovery has been slower but still a number of transactions have successfully completed, both Princes Foods and Shawbrook are set to price this year, and there is more confidence in the 2026 IPO pipeline.
  
  
• There was $14.6bn of European ECM activity in September, with $3.3bn from the UK. This included the sale of Anglo American’s remaining 19.9% stake in Valterra Platinum at $2.5bn. There were two notable European IPOs in September, the $1.1bn IPO of SMG Swiss Marketplace Group and the $683m IPO of NOBA Bank Group. IPOs set to complete in October include Verisure and Ottobock which are understood to be covered multiple times, and the £95m UK IPO of The Beauty Tech Group, which started trading on Friday 3rd October.
   

• September continued the positive trend for equities. Despite European markets having outperformed their US counterparts for much of the year, a strong rally in large cap US tech and a continued catch up of the Russell 2000 has brought the US in line with the European index performance, in local currency terms. Whilst European indices continued to climb over the course of the month, UK Budget uncertainty and France’s political woes have allowed the US to take pole position for September.
• As headlines move away from the fluctuations of President Trump’s policy agenda, volatility has continued to subside since the peak in the days following ‘Liberation Day’. The VIX has continued to sit firmly below the 20 level deemed to be positive for ECM activity, closing the month at 16.1.
• In the UK for August, the larger cap FTSE 100 was outperformed by its smaller cap counterparts finishing the month up 1.8%, the FTSE 250 up 1.9%, the FTSE AIM100 up 2.2% and FTSE Small Cap up 1.7%. The blue chip index remains significantly ahead YTD. Elsewhere in September, the Stoxx600 was up 1.5%, S&P 500 up 3.5%, Nasdaq up 5.6% and Russell 2000 up 3.0%.

• 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, in August and September investors partially reversed some of their pivot away from US equities particularly in relation 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 FTSE 250. Despite this improvement, as at the end of September, the FTSE All-Share still sits at a 43.6% discount to the S&P, and a 24.6% discount on an equal weighted basis (at a headline level).

• UK inflation remains ahead of other regions and for August maintained its level at 3.8% y/y in line with consensus. Service sector inflation fell to 4.7% from 5.0%. Core eased to 3.6% from 3.8%.
• Eurozone CPI inflation data for August remained unchanged at 2.0%, as did the core rate at 2.3%. In the US, CPI ticked up to 2.9% y/y in August from 2.7% in July, whilst core remained at 3.1%.
• At the latest FOMC meeting, Fed Chair Powell described the 25bp cut as a risk management cut as the FOMC seeks to balance the upside risks to inflation with the downside risks to the labour market. Our Economists see just one more reduction in rates this year, but a further deterioration of the labour market could bring an additional cut into play.
• The ECB has maintained the current level of rates since its cut in June. In the UK, the MPC kept the Bank rate on hold at 4.00% in September, with the majority of MPC members judging the risks not to have changed materially since the August meeting. The market is currently pricing in only a slim chance of further rate cuts in the Eurozone and in the UK by the end of this year.

• Recession expectations have continued to fall, and an increased number of investors are expecting a “soft landing”, with 67% of those surveyed in the latest BAML investor survey expecting a soft landing versus 37% at peak Liberation Day concerns.
• 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 a second wave of inflation viewed as the primary concern, followed by a loss of Fed independence and a US dollar debasement.
• 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

• US$2.06bn raised from nine IPOs in September 2025 across Europe, with an average deal size of US$229m. There was two IPOs greater than US$50m – SMG Swiss Marketplace Group which raised $1,136m at IPO and NOBA Bank which raised $806m at IPO.
• There were four IPOs over US$1bn in 2024, and two IPOs over US$1bn in 2025 with SMG Swiss Marketplace Group the largest IPO of 2025 at US$1,136m, surpassing Asker Healthcare’s IPO of US$1,019m (March 2025). This does not include Rosebank, deemed to be a quasi-IPO due its nature.
• 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 48.5% 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)}