OCTOBER’S MARKET LANDSCAPE SHOWED SIGNS OF RENEWED RISK APPETITE AND POLICY RE-ALIGNMENT
MONTHLY HIGHLIGHTS
- The International Monetary Fund warned in mid-October that global financial stability risks remain elevated despite the apparent calm in markets. The institution highlighted concerns amongst some analysts about the growing influence of non-bank financial intermediaries, and perceived vulnerabilities in sovereign debt markets. It raised caution that modest shocks could be met with rapid asset repricing.
- A significant diplomatic meeting between Donald Trump and Xi Jinping in late October signalled a tentative softening in U.S.–China trade frictions. The discussions reportedly focused on critical areas such as rare-earth minerals, export restrictions, and technology supply chains. The encounter was viewed as a cautious step towards rebuilding dialogue between the world’s two largest economies, even as deep structural tensions remain.
- Earlier in the month, global equity markets were rattled by renewed tariff concerns after remarks from the U.S. administration suggested a potential escalation in trade barriers on Chinese goods. The comments reignited volatility across technology-heavy indices, reminding investors of market sensitivity to political statements. The sharp market reaction reflected how sensitive investor confidence remains to any signs of trade disruption.
- The UK equity market began October on a strong footing, with the FTSE 100 reaching fresh record highs driven by pharmaceutical and consumer-staples stocks. The rally came despite broader global uncertainty surrounding U.S. fiscal negotiations and weaker economic data from major economies. The performance highlighted the relative resilience of defensive sectors and renewed investor interest in companies with stable cash flows and strong pricing power.
- Towards the end of the month, Nvidia achieved a landmark milestone by becoming the first company to surpass a market capitalisation of US $5 trillion. The event highlighted the increased investor interest in artificial-intelligence-related stocks and the expectations for the sectors potential growth. However, it also reignited debate about whether current valuations across the technology sector reflect sustainable growth prospects or speculative excess.
EQUITY MARKETS
Global equities advanced broadly in October, as investor sentiment improved across most major markets. Risk appetite appeared to be supported by stabilising inflation indicators, resilient corporate earnings, and growing expectations that central banks would begin easing monetary policy in 2026. The shift in tone towards a softer policy outlook helped reinforce confidence in risk assets after a volatile third quarter.
Japan was amongst one of the stronger performers, with the Nikkei 225 surging by more than 16% to lead global returns by a wide margin. The rally was underpinned by optimism surrounding continued yen weakness, sustained progress on corporate governance reforms, and an accommodative policy stance from the Bank of Japan. Technology-heavy markets performed particularly well, supported by renewed enthusiasm for artificial intelligence themes and solid quarterly results from large-cap technology companies. The NASDAQ Composite and S&P 500 gained 4.7% and 2.3% respectively and while broader US benchmarks such as the Russell 1000 and Russell 3000 also rose slightly above 2%, reflecting steady participation across market capitalisations.
European equities posted consistent gains, aided by easing energy-price pressures and improving investor confidence. The Euro Stoxx 50 and MSCI Europe Large Cap indices advanced by roughly 2.5%, while Spain’s IBEX 35 and France’s CAC 40 rose between 4% and 3% on the back of robust earnings and firm domestic data. UK equities also benefited from the global risk-on tone, with the FTSE 100 climbing around 4% and the FTSE 250 delivering modest gains of around 1%. The UK market’s exposure to energy, mining and defensive sectors, coupled with a stable sterling, contributed to its relative resilience.
Emerging and regional markets produced mixed outcomes. Indian and Taiwanese equities rose 4.6% and 9% respectively, supported by strong domestic demand and buoyant export performance from the technology sector. In contrast, Chinese equities were broadly unchanged, as ongoing property-sector weakness and uneven policy implementation continued to dampen investor sentiment. Central and Eastern European markets fared better, with Hungary, Romania, and Portugal each advancing between 5% and 8%, driven by improving inflation dynamics and currency stability. Smaller-capitalisation indices also joined the rally, with US and European small-caps advancing between 1% and 1.5%. While cyclical sentiment showed signs of recovery, small-caps continued to lag their large-cap peers amid lingering concerns over funding costs and earnings visibility.
In the corporate world, Meta reported its third quarter ended 30 September 2025, with revenue of US$51.24 billion, a 26% year-on-year increase, and costs rising by 32%. However, a one-time tax charge of US$15.93 billion caused net income to collapse to US$2.71 billion (EPS US$1.05), far below what would have been around US$7.25 billion excluding that charge. The company also raised its full-year cap-ex outlook to US$70-72 billion and flagged “notably larger” capital expenditures for 2026 tied to its AI build-out. This result underlines the tension between strong growth in core advertising and the heavy investment burden of Meta’s ambitious AI strategy, signalling to investors that margin pressures may persist despite solid topline momentum. Microsoft delivered another solid quarterly performance, posting double-digit growth in both revenue and profits. Cloud services remained the primary driver, with Azure maintaining strong momentum as enterprise clients deepened their adoption of AI and data-driven solutions. The company emphasised its ongoing commitment to large-scale investment in cloud and AI capabilities, which it views as central to its growth strategy. Despite robust profitability, analysts noted that the pace of investment could place some pressure on margins in the short term. Intel’s third-quarter results surpassed expectations, supported by continued cost-cutting initiatives and operational efficiencies. The company reported a noticeable improvement in gross margins and a rebound in profitability, helping restore investor confidence after a challenging period of restructuring. However, management offered cautious guidance for the final quarter of the year, noting that near-term demand uncertainty and ongoing investment in next-generation technologies could temper momentum. The market’s initial response was positive, reflecting optimism that Intel’s turnaround efforts are beginning to take effect. Exxon Mobil indicated that its third-quarter earnings would be broadly stable, with refining margins helping to offset modest volatility in upstream revenues caused by fluctuations in oil and gas prices. The company also disclosed restructuring-related expenses tied to ongoing efforts to streamline global operations and improve cost discipline. Some investors may have interpreted the update as a sign of steady operational performance despite a mixed commodity backdrop, with attention increasingly shifting towards the company’s capital allocation priorities and transition strategy. Nike’s quarterly update, released at the start of October, reaffirmed the company’s resilience in a softer global retail environment. While sales growth remained steady, the focus shifted towards margin preservation amid elevated logistics and labour costs. Management reiterated its confidence in long-term brand momentum, supported by product innovation and expanding digital sales channels. Investors viewed the update as a signal of disciplined execution, with the company maintaining its leadership position despite macroeconomic headwinds.
CREDIT MARKETS
Global bond markets delivered a broadly positive performance in October, recovering from the weakness of the previous month as yields stabilised across major developed economies. The improvement was underpinned by growing expectations that central banks were approaching the end of their tightening cycles, alongside evidence of moderating inflation trends. This combination encouraged a more constructive tone across fixed income markets, leading to a rebound in total returns. Sovereign bonds posted moderate gains, with the longer end of the curve outperforming as duration exposure proved advantageous. US Treasuries advanced between 0.4% and 1.3% across maturities, while European government bonds rose between 0.3% and 1.8%, supported by softer eurozone inflation readings. UK gilts were a standout performer, returning between 0.9% and 5.4%, as investors priced in a lower peak in interest rates and long-dated yields fell sharply.
Emerging market debt registered another strong month, with both investment-grade and high-yield segments delivering gains of between 0.9% and 3%. The performance was supported by currency stability, renewed investor appetite for higher-yielding assets, and improving confidence in several local markets. Local-currency bonds in India and China also produced modest positive returns as yields drifted lower in response to policy support and manageable inflation dynamics. Corporate credit markets moved broadly in line with sovereigns, with global investment-grade bonds advancing by around 1–2%. Credit spreads narrowed slightly as risk sentiment improved and corporate earnings remained resilient, particularly within financials and industrials. However, the high-yield segment showed greater regional divergence. US and global high-yield indices recorded modest gains, while the European high-yield market remained mixed. The weakest performance came from the lower-rated CCC cohort, which declined over 4% amid heightened concerns over credit quality, whereas higher-quality BB credits managed to post small advances. Duration exposure continued to add value across most developed markets, as longer-maturity government and corporate bonds outperformed shorter tenors, leading to further curve flattening. The shift reflected growing investor positioning for an eventual transition towards interest rate cuts in 2026.
CENTRAL BANKING, THE ECONOMY AND GEO-POLITICS
In Europe, the ECB entered the month with what can be described as a “wait-and-see” tone. Although inflation in the euro-area remained broadly in check, economic activity was starting to show signs of stabilisation rather than acceleration. As a result, when the ECB met, it opted to keep its key interest rates unchanged for at least the third consecutive meeting. The central bank’s message emphasised that the current policy stance remains appropriate for the time being and that future moves will depend very much on the evolution of inflation and growth data rather than on a pre-set path. This restrained posture left markets debating whether the ECB had finished cutting rates or was simply pausing to assess how the economy responds before acting further.
Turning to the United States, the Fed had a somewhat more active schedule, and although one rate reduction was delivered, what captured attention was the reticence expressed about further near-term easing. The Fed lowered its benchmark rate modestly, reflecting the still-healthy growth backdrop and the persistence of inflation pressures. At the same time, Chair Jerome Powell and his colleagues stressed that additional rate cuts later in the year were “far from assured” which is a phrase that punctured some of the more aggressive market expectations for early easing. The effect was an upward nudge to U.S. Treasury yields, a firmer dollar, and a reminder of the delicate balancing act faced by the Fed between supporting growth and containing inflation. Meanwhile in Japan, the BoJ remained on hold as well, maintaining its ultra-low policy rate yet again. However, beneath the surface the institution’s internal dynamics were becoming more interesting. A minority of board members dissented, advocating for a rate hike, reflecting growing confidence in Japan’s economic recovery and rising wage pressures. Although the governor publicly maintained that the inflation path and wage growth needed to confirm their sustainability before a move. Some analysts suggested that a shift towards policy normalisation may be increasingly possible. The BoJ also reiterated that it stands ready to raise rates if key indicators evolve in line with its forecasts, which the markets interpreted as a subtle hawkish shift.
In the economic arena, the International Monetary Fund (IMF) updated its outlook for global growth in mid-October. While the revision brought a modest upward adjustment compared with earlier in the year, the broader picture remained of a world economy moving forward, albeit at a tempered pace. Projections for 2025 came in at around 3.2 % growth, slipping slightly to 3.1 % for 2026. The narrative behind the numbers is telling: even with some tariff-relief and renewed investment, structural headwinds such as ageing populations, weak productivity and fragmented supply chains are constraining momentum.
On the trade front, a tentative thaw may have emerged in the protracted tensions between the United States and China. With both sides appearing to agree a “framework” of a trade accord. The deal, while still subject to formalisation, signalled a potential shift in dynamics carrying implications for commodity flows, foreign investment and sentiment.
Geopolitically, some research reports indicated a trend towards more regional and security-focused economic integration. With think-tanks and research bodies pointing to rising “geo-economic” fault-lines where countries are increasingly aligning supply-chains, payments systems and trade blocs along strategic lines of trust and risk, rather than purely business logic. In Europe’s political sphere, some investors raised risk adversion the combination of electoral pressures, shifting fiscal postures and energy-security concerns added a layer of potential volatility to what was already seen by some as a sluggish growth environment. Amidst governments weighing spending constraints against the needs of transition and competitiveness, markets considered the tight budgets and political fragmentation with longer-term growth potential in the region.
Another dimension related to commodity markets and inflation flows that remained in focus. With global activity cooling and trade flows under stress, commodity prices showed signs of softness, which in turn fed into lower inflation expectations in some advanced economies. That dynamic offered a partial offset to the inflation-risk headlines yet also raised questions about demand durability and investment returns in extractive sectors. In short, some market participants reacted to both inflation surprises and growth disappointments. Lastly, the interplay of geopolitics and economics surfaced in the emerging-market space. Regions such as Southeast Asia and Latin America found themselves navigating a changing landscape where trade-bloc negotiations, digital economy link-ups and supply-chain re-routing featured prominently. As the world’s manufacturing and trade architecture adapts to strategic concerns, countries that can offer stable, resilient links in new chains may be better positioned to benefit, however, the adjustment process brings transitional risks, including capital flow volatility and policy strain.
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