Across the Eurozone, retail activity showed only marginal improvement in August, inching up by 0.1% – a weaker outcome than most economists had predicted. Year-on-year, sales were 1% higher, pointing to a modest degree of resilience in consumer spending. Confidence among households improved through the third quarter of 2025, and real incomes continued to rise, both of which were expected to offset some of the anxiety surrounding trade frictions with the United States. For now, however, even while temporary agreements have helped calm those tensions, demand remains subdued and is likely to stay weak through the rest of the quarter before possibly recovering in 2026.
In France, political uncertainty deepened when Prime Minister Lecornu stepped down less than a month after taking office. In his statement, Lecornu blamed his departure on the refusal of opposition parties to engage in meaningful compromise, saying he would report back to President Macron on whether a viable coalition and governing agenda could still be secured. His resignation adds to a long string of political upheavals that have unsettled France since Macron dissolved the National Assembly in mid-2024. Financial markets reacted swiftly and negatively – French markets sold off on Monday and the Euro moved lower. The latest turmoil has injected even further ambiguity into markets via renewed calls for Macron to consider his own position in power, especially with next year’s budget negotiations due within weeks.
UK construction improved moderately in September although still remained in contractionary territory, rising to a three-month high of 46.2 in September from 45.5 in August. Analysts link the downturn to subdued sentiment ahead of the budget and falling current output.
Still to come this week, markets will closely examine the Fed minutes from the latest meeting, where policymakers cut interest rates by 25 basis points. Investors will be searching for clues about the likelihood of further rate cuts later this year, particularly given that the U.S. government shutdown has delayed some key pieces of economic data last week. We also have Japanese PPI data, and U.S. Michigan Consumer Sentiment.
Nicola Tune, Portfolio Specialist
