Global markets advanced in October, supported by resilient economic data, easing inflation pressures, and strong demand for AI-related technologies.
The US Federal Reserve cut rates by 25 basis points, while the ECB and Bank of England held steady, reflecting differing views on economic softness and inflation trends.
Global equities rose on strong earnings easing trade tensions, despite France’s downgrade. AI optimism boosted Taiwan and Korea and China, ASEAN, and LatAm rebounded. Japan held firm.
Markets broadly advanced in October, supported by easing inflation, resilient economic data, and strong demand for AI-related technologies. Central banks showed mixed signals, with the US Federal Reserve cutting rates, while the ECB and BoE held steady. Political developments, trade negotiations, and corporate earnings also influenced regional performances.
European equities hit new highs, driven by strong Q3 earnings, easing trade tensions, and resilient economic data. Tech, utilities, and healthcare sectors outperformed, while communication services lagged. The European Central Bank held interest rates steady at 2% for the third consecutive meeting, citing stable inflation and modest economic growth. Eurozone GDP grew 0.2% in Q3, with Spain and France leading, while Germany and Italy stagnated. Headline inflation dipped to 2.1%, just above the ECB’s target. Core inflation held at 2.4%, and services inflation rose to 3.4%. French PM Lecornu resigned and was reappointed, proposing to delay pension reforms until after the next presidential election. This helped ease market concerns and supported French equities. However, France’s credit rating was downgraded by S&P and Moody’s.
UK equities rose in October, driven by a positive earnings season and improved consumer sentiment. Inflation remained unchanged at 3.8%, lower than expected due to falling food and drink prices. Core inflation edged down to 3.5%, and services inflation stayed at 4.7%, below the Bank of England’s forecast. Economic growth was modest, with GDP increasing by 0.1% in August, supported by services and construction. Wage growth slowed to 4.4% annually, while unemployment rose slightly to 4.8%. Consumer confidence reached its highest level of the year, and retail sales rose unexpectedly for the fourth consecutive month, reflecting resilient consumer behaviour despite inflation and anticipated tax hikes.
US equity markets outperformed globally in October, driven by strong AI demand, positive corporate earnings, and a Federal Reserve rate cut. Technology and healthcare sectors led gains, while materials and financials lagged. Inflation rose to 3%, slightly below expectations, and core inflation fell to 3%. The Fed cut rates by 25 basis points but signalled caution about further easing. Consumer confidence declined slightly but remained above expectations. PMI data showed expansion in both manufacturing and services. Trade tensions eased following a meeting between Presidents Trump and Xi, resulting in agreements on tariffs and exports. Labour market data was unavailable due to a government shutdown.
Asia Pacific equities advanced in October, supported by strong export data and favourable policy signals for technology. Taiwan and Korea benefited from AI demand and optimism around the APEC summit. Japanese equities rose on political stability and a rally in tech shares, with inflation rising to 2.9%. Chinese equities declined amid pre-APEC tensions but recovered slightly after conciliatory trade talks between Presidents Trump and Xi. Despite weak retail and property data, strong exports and supportive policy signals lifted sentiment in tech sectors. Indian equities gained on strong performance in IT and financials, supported by solid macro data and optimism around trade talks. Australian equities were flat, with early gains reversed by a surprise rise in inflation, dampening hopes for a rate cut.
Emerging markets maintained positive momentum in October, driven by AI demand and supportive policies. Latin America rallied, with Brazil benefiting from easing inflation and political stability. Chile and Peru gained on rate cuts and strong commodity demand. ASEAN markets posted gains, with Indonesia rebounding on new lending rules and Thailand supported by domestic stimulus. South African equities rose modestly, led by resource stocks, though political uncertainty persisted. Eastern European markets advanced, with Poland, Hungary, and the Czech Republic supported by rate cuts, strong earnings, and growth-oriented policies.
Government bond markets had a strong month, with UK gilts delivering their best performance in nearly two years, returning 2.86% due to easing inflation pressures. US Treasuries and German bunds also posted gains. The US Federal Reserve cut interest rates by 25 basis points to a range of 3.75%–4.0%, though Chair Jerome Powell signalled that further cuts were not guaranteed. The ECB held rates steady, and the BoE was expected to cut rates amid signs of economic softness. Corporate bond markets performed well, especially investment grade, with sterling IG returning 2.17%. Euro and dollar IG also posted gains, though spreads widened slightly for dollar IG. High yield bonds saw more modest returns, with sterling leading. European IG issuance was strong at €47 billion, and Meta announced a record $30 billion bond offering in the US.
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