The record $55bn buyout of Electronic Arts, at an all-time high share price, in contrast to the $10bn Walgreen Boots in August at a very depressed share price, prompted top of the market commentary. The deal was brokered by Trump’s son in law and involved Middle Eastern funds who have never been particularly price sensitive.

Tariff fears reemerged as Trump slapped 100% tariffs on certain pharmaceuticals and 25% on big trucks. More recently he announced an additional 100% tariff on China and export controls on ‘critical software’ so this saga is a long way from being over.

The US Government shutdown means that we have no economic data and specifically no September jobs report making the Federal Reserve’s job even harder. Stock indices haven’t paid much attention until recent tariff actions and there are real fears, expressed by many central and prominent investment bankers, that there is over valuation in the AI sector as a whole. Certainly, we are seeing similar behaviour to before where highly valued equity is used to perform a raft of transactions of an unsettling circular nature (eg Nvidia investing $100bn into OpenAI , mainly equity). JP Morgan produced some penetrating analysis pointing out that AI related debt forms 14% of the IG index ($1.2Tn), larger than US banks as a sector(!).

US treasuries remain volatile and the election of stimulus advocate Sanae Takaichi as premier of Japan’s leading party caused long end yields to spike although they have since recovered.

French sovereign yields suffered as Macron lost another Prime Minster in short order. The French fiscal outlook remains fragile but Asian investors still buy their debt alongside Germany’s due to liquidity. This could change if we see downgrades this month from Moody’s, or next month S&P, as there would likely be forced selling from Asian institutional investors. On a more constructive note for the Eurozone, energy costs have dropped to pre-Ukraine invasion levels amidst a dramatic rise in LNG imports (as opposed to previously relied upon pipeline supply).

UK growth in Q2 fell to 0.3% as opposed to 0.7% in Q1. Front loading ahead of tariffs was a contributor but weak business investment was also a factor. Whatever the size of fiscal shortfall  Rachel Reeves faces, it is large and no one knows how it will be filled. The Treasury now has a narrative of telling business to talk up the UK economy, this is from a government that actively talked down the UK economy after the 2024 election saying Britain was ‘broken’.

US IG primary market sales hit a record high in September at $172bn amid strong demand. Credit spreads have recently backtracked a little from recent tights although Sterling has remained the most supported.

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