October was another strong market for global equities. The S&P 500 delivered its sixth straight monthly gain, posting its 36th all-time high of 2025 in the process. The Nasdaq went one better, with its seven consecutive gains the longest streak since 2018. Much of this was underpinned by a broadly positive earnings season – especially from big tech – strong economic data and a one-year deal between China and the US to pause export controls on rare earths and chips. In Japan, the Nikkei had its strongest month since October 1990 as the new government led by Sanae Takaichi came to office.

However, there were wobbles along the way, notably in private credit and regional banks around the middle of the month, which filtered through into the banking sector and broader equity market. Wall Street’s Vix “fear index” briefly touched a six-month high on the back of the heavy sell-off in US regional bank shares, however this reduced sharply after remarks by Trump that suggested that Washington would overcome trade tensions with China. On the macroeconomic front, the Federal Reserve delivered a widely expected 25-basis-point rate cut following lower-than-expected inflation numbers but struck a cautious tone. Chair Powell said further easing was “not a foregone conclusion,” tempering expectations for another cut in December.

Source: Bloomberg as at 31 October 2025.

October began with a sharp jolt of volatility as renewed trade tensions between the US and China rattled markets, triggering the S&P 500’s worst one-day fall since April. President Trump’s threat of sweeping new tariffs and export controls briefly unnerved investors before sentiment turned on hopes of a trade truce. Subsequent meetings between US and Chinese officials, culminating in a Trump–Xi summit in South Korea, eased fears of escalation and helped risk appetite recover. By month-end, equities had regained their footing, extending their winning streak.

Yet the rally was narrow and uneven. The Nasdaq rose in tandem with the S&P 500, driven by ongoing enthusiasm for large-cap technology and AI-related stocks. The Magnificent 7 gained 4.9%, with Nvidia briefly becoming the first company to reach a US$5 trillion market cap, a clear sign of continued strength in the tech and communication services sectors. Consumer-discretionary stocks also benefitted modestly from gains in mega-cap names such as Tesla and Amazon. In contrast, the equal-weighted S&P 500 fell for the first month since April, meaning most companies declined even as the headline index moved higher.

The financial sector was the main drag. Renewed concerns about private-credit exposures and isolated cases of alleged fraud emerged mid-month, sending Zions Bancorp and Western Alliance Bancorp lower and weighing on the broader banking indices. Investors were already on edge after the bankruptcies of US auto parts supplier First Brands and car dealership Tricolor. However, fears of contagion were contained, as other institutions reported credit loss provisions that were smaller than analyst expectations.

Domestic equities were broadly firmer in October, led higher by positive gains in financials and industrials, while resources lagged after precious metal prices appeared to have peaked around the middle of the month. Arguably, the standout development during the month was South Africa’s removal from the Financial Action Task Force (FATF) ‘grey list’; a positive outcome for the domestic economy that should improve capital inflows, stimulate economic activity, and support greater financial market stability. The local bond market responded favourably, with the 10-year government bond yield declining to around 9% by month-end. Bonds also benefited from expectations of further rate cuts in the United States into 2026, which would increase the relative attractiveness of South Africa’s higher-yielding assets.

The rand continued its strong run through most of the month but ended marginally softer against the US dollar. On the macroeconomic front, inflation shifted higher but remained contained, with headline CPI ticking up to 3.4% and core inflation rising modestly to 3.2%, while PPI increased to 2.3%, all slightly below market expectations. Retail activity softened, with retail trade growth slowing significantly to 2.3% year-on-year in August from 5.7% in July. Meanwhile, factory activity (PMI data) contracted, falling to 49.2 in October 2025 from 50.8 in the previous month.

Source: Bloomberg as at 31 October 2025.

Chinese equities had a volatile month and lagged global peers, with escalating trade tensions, mixed economic data, and an eventual de-escalation between Washington and Beijing all contributing. The month began with China announcing sweeping export controls on rare earths, which prompted President Trump to threaten an additional 100% tariff on Chinese goods effective from 1 November. This initial escalation sent markets lower, with investors fearing a return to the trade war dynamics from earlier this year.

Chinese economic data released during October painted a mixed picture. GDP growth slowed to 4.8% year-on-year in the third quarter, but industrial production and exports beat expectations. However, the trend of weak spending continued as inflation slipped -0.3% year-on-year in September, worse than consensus estimates of -0.1%, and the contraction in real estate activity deepened.

The geopolitical landscape shifted dramatically late in the month as markets rallied on optimism ahead of the Trump-Xi summit. Sentiment improved as both leaders appeared to intentionally dial down the inflammatory rhetoric ahead of the meeting in South Korea, as it became more evident that both leaders seek a more productive way to work together. The end result was a one-year trade truce, suspending export controls on rare earths and potentially semiconductors, as well as a reduction in some tariffs. The temporary trade truce provided relief to Chinese equities into month end, although not enough to lift them back into positive territory.

Emerging markets (EM) advanced in October as investors rotated back into risk assets following a late-month US rate cut and a powerful upswing in the semiconductor cycle. Asia continued to set the pace, led by Taiwan and South Korea on accelerating AI-related demand across foundry and memory. By contrast, China lagged as an early exchange of tariff-related threats with the US around access to rare earths, ahead of the Trump-Xi summit at the end of the month, led to a sharp sell-off in equities. Weaker economic data also kept a lid on risk appetite. Equities recovered strongly as the inflammatory rhetoric between the two leaders softened in the run-up to the meeting, heightening expectations of a positive outcome, which did ultimately materialise in the shape of a 12-month truce.

Elsewhere, a rate cut by the US Federal Reserve reinforced a global ‘soft-landing + easing’ narrative, supporting duration-sensitive equities across EMs. The same macro mix amplified the semiconductor upcycle: Taiwan’s preliminary Q3 GDP surprised to the upside as AI server exports and data centre investment remained robust, providing a solid fundamental backdrop to October’s equity gains. South Korea similarly benefitted from the chip ‘super cycle’ spurred by the AI boom, with October data showing strong chip exports. In India, hopes of a potential trade deal with the US, monetary policy interventions and foreign investor inflows turning positive in October were among reasons for optimism during the month.

The micro drivers fitted neatly into the sector dynamics, with information technology the de-facto engine of EM performance over the month through Asian semis and hardware. Domestically geared areas, such as parts of consumer discretionary in China, struggled alongside weak manufacturing prints, while the risk-on mood saw defensive sectors including healthcare and consumer staples lag.

European markets were broadly positive, with the Stoxx 600 reaching a new high as the tech rally filtered through, combined with strength in the utilities and energy sectors. There were pockets of weakness, however, with France remaining a source of instability. Prime Minister Lecornu announced his resignation before being reappointed again, with his government surviving two no-confidence votes after making concessions on proposed pension reforms. On the macro front, Eurozone inflation dipped to 2.1% in October, hovering above the ECB’s 2% target for the second month in a row. Q3 growth was slightly better than expected at 0.2%, encouraging the central bank to hold rates at 2% for the third consecutive meeting. 

The UK also saw another positive month, albeit with different drivers. Healthcare names were among the biggest outperformers, while a fall in gilt yields provided a tailwind to domestic and rate-sensitive sectors such as utilities. Commodity strength supported the mining sector. Economic growth was also in focus, with official data showing the UK economy expanded by 0.1% in August, helped by the UK manufacturing sector, giving the Chancellor a boost ahead of November’s crucial budget. Inflation held steady at 3.8%. The Financial Conduct Authority also outlined plans to exempt short sellers from publicly disclosing their identity in a departure from EU regulations, moving the UK’s approach more in line with the US, which only discloses short positions in aggregate without revealing the identity of those holding them.

Continuing with the strong year-to-date theme, October was another positive month for the emerging market (EM) fixed income asset class. A healthy appetite for risk boosted EM bond markets, with US Treasury market moves also helping.

The sovereign hard currency debt market delivered a 2.1% return. Credit spreads tightened – especially in the high-yield segment – and the decline in US Treasury yields also contributed to returns. Argentina was the top performer in the index – the country’s bonds rallied sharply after President Milei’s party performed better than expected in the national midterm elections, clearing the path for further economic reforms.

The local currency debt market gained 0.5% in US dollar terms, despite the US dollar strengthening against EM currencies – particularly in Central and Eastern Europe – reflecting a weaker euro. Bonds in South Africa and Indonesia performed well, while strong copper prices remained supportive for the Chilean peso and the Peruvian sol.

The EM corporate debt market rose 0.6%, boosted by the fall in US Treasury yields. Although credit spreads remained broadly unchanged overall, some company specific developments caused concern among the lower-rated parts of the market, where spreads widened. Argentina was the top performer thanks to positive headlines at the sovereign level.

Source: Bloomberg as at 31 October 2025.

US

October began with a federal government shutdown, as politicians failed to agree a fiscal budget. This curtailed key economic data releases and triggered flows into safe-haven assets, helping US Treasury yields to fall. The potential economic and employment impact of this shutdown, coupled with better-than-expected news on inflation, added to market participants’ confidence that two more rate cuts would materialise in 2025, providing an additional boost to the US Treasury market (pushing yields down further). The Federal Reserve subsequently cut its benchmark rate by 25bps towards the end of the month, citing concerns about weak job growth, and signalled that its quantitative tightening programme – which involves shrinking the US central bank’s balance sheet – may be approaching its end. However, Powell’s statement that further easing in December was not a “foregone conclusion” caused Treasury yields to rise again, as market participants dialled back their expectations of a rate cut in December. For the month overall, the US Treasury yield curve flattened, as shorter-dated yields underperformed those at the longer end.

Europe

Eurozone bond markets remained relatively stable as inflation hovered just above the European Central Bank’s (ECB) 2% target, with headline inflation easing slightly to around 2.1%. The ECB kept its deposit rate unchanged at 2% for a third consecutive meeting, signalling comfort with the current policy stance and no immediate plans for rate cuts. German 10-year bund yields ended the month around 2.6%, having dipped mid-month towards 2.5% as demand for safe-haven assets rose. Government bonds in France initially came under pressure as political turmoil continued to weigh on investor sentiment following the resignation of the prime minister. However, sentiment improved after the government survived no-confidence votes, and yields ended the month slightly lower across the curve.

UK

In the UK, gilt yields fell significantly across the curve as investors brought forward their expectations of rate cuts from the Bank of England. Market participants had been expecting headline inflation to rise, but the September print was lower than expected (remaining at 3.8%), while wage growth slowed. The government bond rally that followed saw the yield on the two-year gilt falling to its lowest level in over a year as markets repriced to reflect a higher probability of a rate cut occurring this year. Investors’ focus remains on the upcoming budget on 26 November, and the approach Chancellor Reeves takes to address the country’s fiscal challenges.

Japan

In Japan, Sanae Takaichi was appointed as the new leader of the Liberal Democratic Party (LDP) and subsequently became prime minister. The announcement caused an initial steepening in the yield curve, reflecting expectations that Takaichi’s administration would adopt a more expansionary fiscal stance. However, calm subsequently returned with a diplomatic visit from President Trump and positive trade news. Turning to monetary policy, the Bank of Japan left its interest rates unchanged at 0.5% and signalled ongoing caution towards further hikes, which led to a weaker yen. As of the end of October, investors’ expectations for the next rate hike were pushed out to the second quarter of 2026.

Source: Bloomberg, as at 31 October 2025.

October was a more muted month for global credit markets in the context of the gains seen year-to-date, although most asset classes delivered positive total returns.

In a month in which sovereign bond yields fell in both the US and Europe, the more interest rate-sensitive markets, including investment-grade (IG) debt and agency mortgage-backed securities (MBS), were the top-performing areas of the asset class. Agency MBS saw spreads tighten over the month as interest rate volatility eased. Credit spreads also tightened somewhat in the European IG market, but were broadly unchanged in the US IG market – both markets remain historically expensive. Other markets that performed particularly well included bank capital (AT1s), where attractive carry (income) provided a boost.

In the high-yield market, spreads widened overall in both Europe and the US, primarily driven by the riskiest parts of the market (bonds rated CCC and below). There has been an increase in the number of company-specific issues in the more distressed area of the market following the notable collapses of Tricolor and First Brands in September. These developments also resulted in a weaker month for European loans and lower-rated tranches of collateralised loan obligations (CLOs), with the latter underperforming its less-risky counterparts.

Oil remained under pressure in October on expectations that supply growth will outpace demand, prompting some industry executives to suggest this could spur merger & acquisition activity. The price of a barrel of Brent crude declined 3% to approximately US$65 per barrel. Natural gas prices rallied due to a combination of colder weather forecasts, which increased expected heating demand, and record-high liquefied natural gas (LNG) exports, which tightened supply.

Gold remained strong, at one point exceeding US$4,380 per Troy ounce, continuing to be supported by demand from central banks and investors seeking to protect against geopolitical uncertainty and a weakening US dollar. The precious metal eased from its peak towards month-end, finishing October closer to US$4,000/oz, but still gained in the month overall. After a period of very strong returns, the shares of gold producers underperformed the metal itself in October, with the NYSE Arca Gold Miner’s Index declining about 5%.

Copper also reached a new peak in October, of about US$11,137 per tonne, as disruptions at major mines exacerbated fears of a supply shortfall. Over the full month, copper gained about 6%. Among other industrial metals, the prices of iron ore, aluminium and zinc all finished October in positive territory. In agriculture, progress in US-China trade negotiations supported soybean prices, with China committing to purchasing millions of tonnes of the crop in the next few years.

Source: Bloomberg as at 31 October 2025.