Trade Tensions Return, UK Housing Cools, and Gold Hits Record Highs

Markets reversed course this week as political and trade risks resurfaced. Renewed U.S.-China tensions, weaker German data, and renewed political turmoil in France weighed on sentiment, while gold prices surged past $4,000 per ounce - a sign of investors’ growing caution.

We start in the UK, where housing activity has softened, before turning to Europe’s industrial slowdown, the latest from the U.S. Federal Reserve, and a look at the broader global picture.

UK - Housing activity slows amid fragile confidence

The latest data from Halifax and the Royal Institution of Chartered Surveyors (RICS) showed the UK housing market losing momentum again in September. The Halifax House Price Index fell 0.3% month-on-month, defying expectations for a small gain, although prices remain marginally higher than at the start of the year.

RICS data showed buyer demand and agreed sales both stayed in negative territory for a third consecutive month, with its house price balance rising only slightly to -15 from -18 in August. Mortgage approvals, which had risen through much of the summer, are now softening once more.

The figures highlight an environment of lingering caution. While borrowing costs have eased modestly, affordability remains stretched and buyers are reluctant to commit ahead of November’s Budget.

The FTSE 100 eased 0.7% over the week, in line with broader European weakness, while sterling traded largely flat. With the Bank of England likely to keep rates on hold until early next year, investors appear content to wait for clearer signs of direction.

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Europe - Germany falters, France in turmoil

European markets pulled back from record highs, with the STOXX 600 down 1.1% and all major national indices closing lower. The losses followed a disappointing set of industrial figures from Germany and renewed political instability in France.

German industrial output fell 4.3% in August, far worse than expected, driven by a sharp drop in car production. Exports also declined, down 0.5% on the month, with shipments to the U.S. plunging more than 20% year-on-year. The data reignited fears that Europe’s largest economy could slip back into recession.

In response, Berlin announced a package of measures to reduce budget costs and support the domestic auto industry, including subsidies for electric vehicle purchases. However, investors remain unconvinced that fiscal tweaks will meaningfully offset weaker global demand.

In France, Prime Minister Sébastien Lecornu resigned after just weeks in office - the shortest-lived government in the Fifth Republic’s history. President Macron faces renewed calls for early elections as far-right leader Jordan Bardella pushes for a parliamentary dissolution. The turmoil underscores the fragility of French politics at a time when fiscal reform remains urgently needed.

Despite the turbulence, inflation data across the eurozone stayed broadly contained, and European Central Bank officials reiterated that policy rates at 2% leave the ECB “well placed to respond” to any emerging risks.

United States - Trade tensions flare, gold shines

U.S. equities fell for the week as trade tensions with China resurfaced and political gridlock in Washington weighed on sentiment. The Nasdaq and S&P 500 both slipped, erasing earlier gains driven by continued enthusiasm for artificial intelligence stocks.

President Trump’s announcement that he is considering “a massive increase of tariffs on Chinese products” triggered a sharp sell-off on Friday, following China’s proposal to impose new export controls on rare earth minerals. The escalation revived fears of a new phase in the U.S.-China trade dispute, unsettling investors who had been positioning for steady policy easing from the Federal Reserve.

Gold prices surged past $4,000 per ounce for the first time, highlighting the rise in geopolitical risk aversion, while oil fell sharply after OPEC+ signalled higher output from November.

With the U.S. government shutdown continuing and most official data releases suspended, investors looked to private indicators and the Fed’s September meeting minutes for guidance. The minutes revealed policymakers divided between concern over persistent inflation and growing unease about labour-market weakness. Most agreed further rate cuts this year would be appropriate, but the tone was cautious, reflecting the delicate balance between stabilising growth and maintaining inflation credibility.

Bond markets rallied as safe-haven flows increased. Treasury yields fell sharply across maturities, while investment-grade corporate bonds lagged amid light trading and heightened selectivity. High yield markets softened modestly as risk appetite faded.

What It Means for You

For UK private investors, several themes stand out this week:

1. Caution in housing and policy patience. UK property data point to stabilisation, not recovery. With rates likely on hold into next year, market momentum will depend more on sentiment than stimulus.

2. Europe’s recovery under pressure. German industrial weakness and French political strain highlight how uneven Europe’s growth story remains - reinforcing the value of diversification within equity exposure.

3. Renewed trade tensions driving volatility. U.S.-China tariffs, coupled with the ongoing government shutdown, are pushing investors towards havens such as gold and government bonds. Balanced portfolios with quality fixed income remain key.

While inflation has broadly cooled and rate cuts are on the horizon, recent developments are a reminder that macro and geopolitical risks still have the power to disrupt sentiment. Staying globally diversified, measured in equity exposure, and opportunistic in high-quality fixed income remains a prudent stance as we head deeper into the final quarter of the year.