Global markets showed steady progress through October, supported by signs of economic stability, easing inflation pressures, and encouraging corporate earnings. Investors took comfort in the view that central banks may now be at or near the end of their tightening cycles. Although geopolitical risks and uneven data across regions kept sentiment in check, overall confidence in the outlook for growth remained resilient.
In the United States, equity markets advanced further as inflation data continued to moderate and the Federal Reserve signalled a more cautious tone on future rate moves. Corporate results for the third quarter were broadly positive, with technology and consumer sectors leading gains. The labour market showed some cooling, which helped reinforce expectations that interest rates would stay on hold for now. Bond yields fell slightly toward the end of the month as investors adjusted their forecasts for monetary policy, while the dollar remained firm against most major currencies.
European equities made moderate gains but lagged other developed markets with political instability in France, limited exposure to technology/AI and mixed economic data all being factors. Across the region, inflation remains restrained and is expected to fall below the ECB’s 2.0% target, allowing a pause in the interest rate cutting cycle. This was a positive environment for Euro area government bonds with yields falling notably in Italy and Spain.
Japanese equities extended their outperformance, aided by a softer yen, continuing improvement in corporate governance and a new prime minister expected to pursue expansionary policies. Exporters benefited from solid external demand, particularly in technology and industrial goods. Domestic inflation ticked higher but remained below global averages, allowing the Bank of Japan to maintain a moderate policy position. Government bond yields rose modestly however, on expectations of increased supply.
Emerging-market performance was mixed. Asia ex-Japan led, driven by Chinese technology and semiconductor shares following further policy support for domestic innovation. Taiwan and South Korea saw continued strength in export-oriented sectors, and a weaker US dollar provided some relief for local debt markets. In Latin America, an overwhelming victory for President Javier Milei’s party in the midterm elections saw a 50%+ stock market gain as his reform agenda received a strong mandate.
Commodities advanced modestly overall. Oil prices fell amid signs of adequate supply and softer global demand, while gold advanced as investors sought stability and anticipated lower real yields. Industrial metals traded flat, reflecting a balance between policy-driven optimism in China and softer activity data elsewhere.
Markets enter the final months of the year with sentiment cautiously optimistic but tempered by the recognition that valuations in some areas are full and that policy risk remains. The outlook for both equities and bonds depend heavily on the pace of disinflation and the timing of eventual policy easing. Diversification across regions and asset classes continues to provide the most practical way to navigate uncertainty, with high-quality bonds expected to play an increasingly important role alongside global equities and selected real assets.
Source of data: FE Analytics, www.bankofengland.co.uk, www.ons.gov.uk
This commentary in no way constitutes a solicitation of investment advice and should not be relied upon in making investment decisions. Past performance is not a reliable indicator of future results. The value of your investments can fall as well as rise and are not guaranteed.
