Markets left guessing when it comes to interest rates

Key takeaways

Despite the sideshow of trade talks between the US and China, markets remained more interested in interest rate decisions among the world’s leading central banks.

Warm early signs for US-China trade talks

The week began on a cooperative note, with progress reported on trade talks between two of the world’s leading superpowers: the US and China. As part of the wider discussions, China also ended its competition investigation against Google, and negotiations over key businesses like TikTok and Nvidia picked up. Elevated tariffs between the US and China are currently subject to a 90-day truce, which is set to run out in November. If continued engagement ultimately leads to a more lasting truce, this could avoid US tariffs on Chinese goods jumping back up to the 145% rate seen earlier this year.

Despite US interest rate cuts, investors have been left without clarity

Last week also played host to a flurry of decisions from sixteen central banks, as policymakers around the world attempted to set interest rates at the right levels for their economies. Drawing the most attention internationally, the US Federal Reserve (Fed) cut its benchmark interest rate range down to 4%-4.25%. Investors had expected this US rate cut, following a disappointing jobs report, but were left feeling unclear about how many more rate cuts could follow this year.

The Bank of England navigates a challenging UK outlook

Annual UK inflation – measured by the Consumer Price Index (CPI) – held steady at 3.8% in August. Analysts had broadly expected this result, meaning that the market reaction to the news was muted. Business groups claimed to see more evidence of firms passing on higher costs from the government’s hike in payroll taxes and the minimum wage back in April. Meanwhile, government borrowing came in significantly higher than forecast in August, leading to weaker UK government bond markets and a weaker pound. In the face of a tricky economic outlook, the Bank of England’s leading policymakers opted to hold interest rates steady last week, continuing to tread carefully amid sticky inflation.

Market moves

• The US stock market hit a new all-time high in a positive week for most global stock markets. The UK market was among those lagging behind the pack.

• It was a more challenging week for bond prices, with UK government bonds among the poor performers.

• Continuing a dominant theme in 2025 so far, the price of gold rose over the week.

What to look out for this week

• All eyes will be back on the US, as investors look for clues about future interest rate cuts in planned speeches by key central bank officials throughout the week.

• A range of economic data releases could also influence market views on this topic, especially the latest reading of the US central bank’s preferred measure of inflation – Personal Consumption Expenditures, or PCE.

Important Information

Handelsbanken Wealth & Asset Management Limited is authorised and regulated by the Financial Conduct Authority (FCA) in the conduct of investment and protection business, and is a wholly-owned subsidiary of Handelsbanken plc. For further information on our investment services go to wealthandasset.handelsbanken.co.uk/important-information. Tax advice which does not contain any investment element is not regulated by the FCA. Professional advice should be taken before any course of action is pursued.

• Find out more about our services by contacting us on 01892 701803 or exploring the rest of our website: wealthandasset.handelsbanken.co.uk
• Read about how our investment services are regulated, and other important information: wealthandasset.handelsbanken.co.uk/important-information
• Learn more about wealth and investment concepts in our Learning Zone: wealthandasset.handelsbanken.co.uk/learning-zone/
• Understand more about the language and terminology used in the financial services industry and our own publications through our Glossary of Terms: wealthandasset.handelsbanken.co.uk/glossary-of-terms/

All commentary and data is valid, to the best of our knowledge, at the time of publication. This document is not intended to be a definitive analysis of financial or other markets and does not constitute any recommendation to buy, sell or otherwise trade in any of the investments mentioned. The value of any investment and income from it is not guaranteed and can fall as well as rise, so your capital is at risk.

We manage our investment strategies in accordance with pre-defined risk objectives, which vary depending on the strategy’s risk profile.

Portfolios may include individual investments in structured products, foreign currencies and funds (including funds not regulated by the FCA) which may individually have a relatively high risk profile. The portfolios may specifically include hedge funds, property funds, private equity funds and other funds which may have limited liquidity. Changes in exchange rates between currencies can cause investments of income to go down or up.

This document has been issued by Handelsbanken Wealth & Asset Management Limited. For Handelsbanken Multi Asset Funds, the Authorised Corporate Director is Handelsbanken ACD Limited, which is a wholly-owned subsidiary of Handelsbanken Wealth & Asset Management, and is authorised and regulated by the Financial Conduct Authority (FCA). The Registrar and Depositary is The Bank of New York Mellon (International) Limited, which is authorised by the Prudential Regulation Authority and regulated by the FCA. The Investment Manager is Handelsbanken Wealth & Asset Management Limited, which is authorised and regulated by
the FCA.

Before investing in a Handelsbanken Multi Asset Fund you should read the Key Investor Information Document (KIID) as it contains important information regarding the fund including charges and specific risk warnings. The Prospectus, Key Investor Information Document, current prices and latest report and accounts are available from the following webpage: wealthandasset.handelsbanken.co.uk/fund-information/fund-information/, or you can request these from Handelsbanken Wealth & Asset Management Limited or Handelsbanken ACD Limited:25 Basinghall Street, London EC2V 5HA or by telephone on
+44 01892 701803.

Registered Head Office: 25 Basinghall Street, London EC2V 5HA. Registered in England No: 4132340