### European Market Commentary: 28 October 2025

European equities opened the trading session with modest losses, extending a cautious tone from overnight developments in the US and Asia. The Euro Stoxx 50 dipped 0.37%, weighed down by broader market fragility amid $100 billion swings in US stocks that highlighted underlying vulnerabilities in the rally. Germany’s DAX fell 0.40%, reflecting sensitivity to global trade uncertainties, while France’s CAC 40 edged lower by 0.17%. In contrast, the FTSE 100 eked out a slight gain of 0.07%, buoyed by defensive sectors like consumer staples amid sterling’s weakness.

Overnight, US markets had closed higher, with the S&P 500 up 1.23%, Dow Jones advancing 0.71%, and Nasdaq 100 surging 1.83%, driven by big-tech optimism ahead of key earnings and Federal Reserve signals. However, this momentum stalled in early Asian trading, where yen strength pressured exporters, and emerging market currencies like the Philippine peso weakened as authorities allowed market-driven FX adjustments. These dynamics spilled over into Europe, tempering risk appetite and prompting investors to reposition defensively.

Key drivers included lingering ECB policy debates, with markets pricing in a potential pause on rate cuts amid sticky Eurozone inflation data. Political headlines added volatility: US-Japan alliance pledges raised hopes for stable trans-Pacific ties, potentially benefiting European exporters, while southeast Asian shifts toward China could disrupt supply chains. European firms remain in wait-and-see mode on M&A, as evidenced by banking sector pressures—HSBC’s 14% profit drop from litigation provisions underscored broader financial fragility.

On FX fronts, the euro strengthened 0.07% against the dollar, supported by USD pullback from yen gains (USD/JPY down 0.44%). GBP/USD slipped 0.09%, reflecting UK growth concerns, widening the EUR/GBP spread to 0.19%. The Swiss franc firmed modestly versus the USD (down 0.05%), acting as a safe-haven amid geopolitical noise. Overall sentiment is cautious, with investors trimming AI exposure on correction risks flagged by prominent voices and awaiting big-tech results. Positioning leans toward quality stocks, with volatility gauges edging higher as fragile rallies invite reality checks.