Global equities had a volatile October, as a technology sell-off, stress in French bonds and higher energy prices amid geopolitical tension competed for investors’ attention. The weakness began with semiconductor stocks, then widened as investors again questioned the returns on massive AI spending. The S&P 500’s tech sector had its worst week in a year and a half in the middle of the month, and pressure returned towards month-end as earnings from the largest technology companies put their capital expenditure plans under scrutiny. The Nasdaq lost 5.3%, its weakest month since March 2025, while the S&P 500 fell a more modest 0.9% as breadth improved beneath the headline, with the equal-weighted index rising.

The AI concerns travelled across Asia, hitting Korea’s tech-heavy KOSPI and Japan’s Nikkei, while Chinese equities also fell. In Brazil, the Bovespa fell sharply in US dollar terms after Lula’s unexpected win in the presidential run-off. European equities were steadier, with the STOXX 600 outperforming, though France remained the pressure point as nationwide protests turned violent. Oil rose again, with Brent ending the month at around US$118, close to its March peak, on fears of renewed US-Iran escalation. This came despite the G7’s release of 100 million barrels of oil and diesel earlier in the month.

Source: Bloomberg as at 31 October 2026.

US equities rose early in October before a sharp sell-off in technology stocks erased the gains. The Nasdaq had its worst month in more than a year, while the S&P 500 also slipped. However, it was not all bad news as the equal-weighted S&P 500 and the Dow Jones both rose, while the Russell 2000 was little changed. Nine of the S&P 500's 11 sectors ended the month higher.

Technology stocks weakened amid renewed scrutiny of spending on artificial intelligence (AI). Meta's higher-than-expected capital expenditure forecast deepened concerns about whether the scale of investment would generate adequate returns. Alphabet and Amazon also came under pressure as results highlighted the cost of the AI build-out and its impact on cash flow. Intel and CoreWeave fell sharply, reflecting pressures at different points in the AI supply chain: Intel faces challenges in its chip business, while CoreWeave's debt-funded expansion has raised questions about the cost of building out AI infrastructure.

Energy was the S&P 500's best-performing sector in October given the elevated oil price following escalating Houthi attacks on Saudi Arabia, alongside defensive sectors such as health care and consumer staples. Technology and communication services were the only sectors to fall, reflecting the concentration of losses in large technology stocks rather than a broad market decline. US Treasury yields retreated from their early-month highs, providing some relief to equity valuations, particularly in interest-rate-sensitive sectors. The Federal Reserve held rates steady at its October meeting.

South African equities edged slightly lower in October, but beneath the surface, leadership reversed, with financials recovering and resources giving back third-quarter gains. Financials benefited from a firmer domestic sentiment after the Medium-Term Budget Policy Statement (MTBPS), industrials posted a more modest gain, and resources fell sharply as precious metals prices declined. Mid-cap and small-cap shares outperformed larger peers over the month. The market reached a mid-month high before MTBPS - related volatility, a global technology-led retreat and a sharp sell-off on the final trading day.

The defining event of the month was the Medium-Term Budget Policy Statement on 21 October, which showed an improving fiscal position. Treasury raised its tax revenue estimates by R17.1 billion, reported that debt had stabilised at 78.4% of gross domestic product (GDP) and announced R10 billion of temporary fuel levy relief, while lowering its 2026 growth forecast to 1.2% from 1.6%. Moody’s described the budget measures as credit positive and left South Africa’s Ba2 rating and positive outlook unchanged, whereas Fitch questioned the durability of debt stabilisation. Headline inflation edged higher to 4.5% year on year (y/y) in September from 4.4% in August, below consensus expectations of 4.7%, although producer inflation accelerated to 6.2% y/y from 5.0%. The South African Reserve Bank (SARB) warned that second-round inflation risks had increased, and the repo rate remained at 7.25% following September’s increase.

In fixed income, the 10-year benchmark government bond yield fell to 8.73% from 8.96% over the month, after briefly rising above 9% early in October, with bonds strengthening most sharply on budget day. The rand weakened 1.7% against the US dollar to about R16.71, trading between R16.37 and R16.71, as the dollar reached an 18-month high before easing and rising oil costs weighed on the economy late in the month. Brent crude gained 13.6% to US$117.55 a barrel, its highest level in six months, on continued Middle East supply tensions, while gold fell 6.8% and platinum 15.6% on elevated US yields and US Federal Reserve tightening expectations.

South Africa’s growth remained weak. August mining production contracted 12.7% y/y and manufacturing output fell 4.3% y/y, while the manufacturing purchasing managers’ index (PMI) fell to 49.0 in September, signaling contraction on factory floor activity.

Source: Bloomberg as at 31 October 2026.

Chinese equities pulled back sharply in October, driven largely by the unwinding of the AI and semiconductor trade. Much of the year has seen onshore and offshore markets moving in opposite directions but both markets came under immense pressure in October, although offshore showed a degree of resilience relative to the mainland. The earnings backdrop reinforced the anxiety, with those companies reporting so far missing estimates by an average of 9%, putting the index on track for its second-worst quarterly earnings shortfall in two years. Overall, the MSCI China All Shares fell 15.4%, its worst monthly performance in over a year.

On factory floors, China's official manufacturing PMI slipped to 49.3 in October from 50.1 in September, a return to contraction after just one month in expansion. Production, new orders and export orders all contracted, with the decline being attributed to demand being pulled forward ahead of the holiday period, rising international oil prices weighing on petrochemical supply chains and auto sales falling considerably in October. The non-manufacturing PMI similarly fell to 49.7 from 50.2, reflecting a slowdown across services and construction.

The broader economic picture remained one of persistently weak domestic demand, with the decline in export orders particularly troubling given that exports had been one of the few remaining pillars of support for the economy. The property sector offered no relief, with construction activity declining further and developer sentiment remaining constrained.

Following a strong run of returns for emerging market equities in 2026, the asset class suffered its sharpest monthly decline of the year in October, with the MSCI EM Index falling 8% in US dollar terms. A reassessment of the AI investment thesis across North Asian semiconductor markets, compounded by an escalation in the Iran conflict that pushed Brent crude above US$117 a barrel, combined to drive a broad retreat across EM equities. These forces delivered severe headwinds to portfolio returns that few parts of the EM complex were able to withstand. A partial recovery in the final days of the month, driven by record semiconductor earnings and a US Federal Reserve pause on interest rate hikes, was ultimately not enough to rescue the month.

Regionally, South Korea absorbed the lion’s share of the semiconductor sell-off as investors reassessed Chinese memory-chip competition and the financing demands of the global AI infrastructure build-out. This was further compounded by the Elice listing (a South Korean AI cloud-infrastructure company whose shares fell 32% on their first trading day) and renewed scrutiny of financing requirements across the sector. Meanwhile, Taiwan’s market similarly suffered losses as the global chip sell-off continued, despite robust earnings from index bellwether TSMC. The contagion spread to China’s equity markets as AI-linked shares weakened, while new EU trade friction measures against Chinese goods added further pressure. India proved to be a beacon of resilience, delivering a flat return in US dollar terms, notwithstanding the twin pressures of rising oil prices and global bond yields.

Latin American markets traded weaker, as commodity tailwinds failed to offset global and regional cross currents. Luiz Inácio Lula da Silva’s victory in the Brazilian presidential election saw the market’s rally on expectations of a Bolsonaro win sharply unwind.

European equities overcame a shaky start to post their best month since June. The start of October was underpinned by a focus on politics, with French stocks sliding to a six-month low on fiscal concerns and latterly widespread riots. These concerns also led to a sharp widening in the French-German bond spread to a 15-year high. A snap election called in Spain also garnered attention. On the monetary front, the ECB held rates towards the end of the month but confirmed it had discussed a hike, which analysts expect to come in December. President Lagarde announced she would step down in February, eight months earlier than expected, stating that she could not remain neutral on certain issues of importance beyond monetary policy. Turning to sectors, healthcare, food and beverages, and oil and gas outperformed on a combination of positive results and investors seeking an alternative to AI-heavy indices, which had dragged down tech. Banks were a notable weak spot amid disappointing results from key names prompted concerns about margins.

UK equities rallied in October, helped by the rallying oil price and demand for more defensive areas such as pharma amid the move away from AI stocks. The month started in the red as UK borrowing costs surged and the 30-year gilt yield crossed 6% for the first time since 1998, hampering banks, housebuilders and domestic stocks. September inflation also came in above expectations, lifting bets for a Bank of England hike in November. The main political event was John Healey’s first budget, which raised taxes on banks and gambling firms by less than expected and sparked a rally in those stocks. The bank surcharge rises from 3% to 6% for 15 months from January 2027. Healey also announced energy bill subsidies and a freeze in fuel duty, and bond, stock and currency markets were largely calm. Defence firms were among outperformers for the month after Healey said reprioritisation elsewhere would fund the country’s defence plan.

US

US Treasury yields ended October sharply lower across the curve, with the 10-year yield falling 36bps to 4.93%, unwinding most of the September sell-off as investors rushed into safe-haven assets amid AI-related spending concerns. Geopolitical tensions in the Middle East intensified, and elevated oil prices kept inflation concerns in focus, pushing the 10-year yield to 5.35% early in the month, its highest level since 2002. The September CPI print then surprised to the upside, as headline inflation rose to 3.7% year-on-year, reflecting higher energy prices. However, a sharp sell-off in AI-related equities and credit sparked a strong rally in Treasuries, and the 10-year yield posted its largest one-day fall since August 2024. At its late-October meeting, the Federal Reserve (Fed) held rates at 3.75–4.00%, with two members dissenting in favour of a hike. Fed Chair Warsh offered no forward guidance and highlighted strong growth, but the message was marginally less hawkish than expected. Markets scaled back expectations for further rate hikes as financial conditions tightened amid a near-term peak in the AI equity cycle, although a hike remains priced by the end of January.

Europe

French government bond yields rose overall as political and fiscal stress dominated the month, diverging from a broader rally in European sovereign bonds. A sell-off in AI-related names sparked a global rally in bonds, taking the 10-year Bund yield from 3.59% to 3.32%. The spread between French and German 10-year yields climbed to its widest level since 2011, and the 10-year OAT yield closed above 5% for the first time since 2002 amid widespread cost-of-living protests. Moody’s unexpected decision to affirm France’s rating offered some late relief. Energy prices added to inflation concerns, with Brent crude rising 13.6% and European gas prices topping €100/MWh for the first time since 2022. The European Central Bank (ECB) held its deposit rate at 2.50% at its late-October meeting. President Lagarde, who announced she would step down early, signalled that a December hike remains the base case, although markets reduced their expectations for more tightening.

UK

The UK gilt yield curve bull flattened over the month, with the 10-year yield falling 14bp to 5.28%. Gilts benefited from the global bond rally, although hawkish domestic data meant yields fell less than in the US and Germany. UK data repeatedly surprised to the upside. GDP rose 0.1% in August, confounding expectations of a contraction, and the unemployment rate fell unexpectedly to 4.7%. Headline CPI also rose more than forecast, to 3.5% in September, its highest level in almost a year, with core inflation at 2.8%. Chancellor Healey’s first Budget was viewed as broadly neutral, and gilts rallied after the announcement, with the 10-year yield falling to 5.32% on the day. By month end, markets were pricing in a hike from the Bank of England (BoE) in November, which would be the BoE’s first since 2023.

Japan

Japanese government bond yields ended October lower, also pulled down by the broader global bond rally. The curve bull flattened as longer-dated maturities led the move. Inflation picked up, with core CPI rising to 2.1% year-on-year in September, although Tokyo CPI eased slightly in October. At its end-October meeting, the Bank of Japan (BoJ) held rates at 1.25%, as expected, with one member dissenting in favour of a 25bp hike. The BoJ highlighted that underlying inflation had reached its 2% target, and its hawkish guidance left markets mostly expecting a hike in December, helping the yen to strengthen against the US dollar toward the end of the month.

Source: Bloomberg as at 31 October 2026.

Most credit markets came under pressure in October, with spreads widening across most segments as risk sentiment weakened amid rising concerns over AI-related names and higher oil prices. A sharp rally in government bonds cushioned returns for longer-duration assets. The 10-year US Treasury yield posted its largest one-day fall in over two years towards the end of the month, reversing much of September’s sell-off as investors sought safe-haven assets in the broader risk-off move.

Lower-rated high-yield markets were the key source of weakness amid the risk-off move. CCCs suffered sharp losses across both the US and Europe as spreads widened to near decade highs. The broader market was more mixed. US high yield ended the month marginally positive as the Treasury rally offset wider spreads, while European high yield posted losses.

Floating-rate markets also lagged, as wider spreads weighed on returns and the coupon structures offered no benefit from the fall in sovereign bond yields. Within collateralised loan obligations (CLOs), lower-rated tranches posted losses and underperformed higher-rated tranches in both the US and Europe. Leveraged loans also posted negative returns, and European loans were weaker than their US counterparts as spreads widened more sharply.

Investment-grade (IG) credit outperformed the broader market, as its longer-duration profile benefited from the rally in sovereign bonds, more than offsetting a modest widening in spreads. US IG delivered strong gains and outperformed European IG, which also finished in positive territory. US agency mortgage-backed securities (MBS) were among the best performers, helped by the fall in yields and slightly tighter spreads. Bank capital bonds (AT1s) were also resilient, posting small gains as carry offset a modest widening in spreads.

Emerging market (EM) fixed income had a mixed month, with hard currency markets supported by the fall in US Treasury yields and local rates positive in hedged US dollar terms, while EM currencies came under pressure.

US Treasury yields ended October sharply lower across the curve, with the 10-year yield falling 36bp to 4.93%, unwinding most of September’s sell-off as investors sought safe havens amid AI-related spending concerns. Middle East tensions and elevated oil prices initially pushed the 10-year yield to around 5.35%, its highest since 2002, before the yield posted its largest one-day fall since August 2024 later in the month. The Fed kept rates on hold, with two members dissenting in favour of a hike.

The local currency debt market (JPMorgan GBI-EM GD) fell 0.7% in US dollar terms over the month, driven by weaker EM currencies, while local rates posted positive returns. Brazil dragged the index lower, as the surprise victory of the incumbent president Lula da Silva caused a significant sell-off in the real and local rates, given the uncertain fiscal outlook. Lula’s win more than reversed the rally that followed the first round, when markets had positioned for a more fiscally orthodox outcome. In contrast, the Colombian peso had a strong month, helped by the central bank raising its policy rate by 25bps at the very end of September, a hawkish surprise as the market had expected rates to remain on hold.

The hard currency sovereign debt market (JPMorgan EMBI GD) returned 1.4%. Given the fall in US Treasury yields, the more interest-rate-sensitive investment-grade market led returns (2.2%), while high-yield bonds lagged (0.6%). Spreads widened over the month amid the risk-off tone, with high-yield spreads widening more than investment grade. Top index performers included South Africa, where the bonds rallied on a market-friendly medium-term budget, which Moody’s said was positive for the country’s credit profile. In contrast, bonds in Argentina remained under pressure amid the ongoing concerns that next year’s election could be tightly contested.

The EM corporate debt market (JPMorgan CEMBI BD) returned 0.5% in October. The investment-grade portion of the market led returns (1.1%), as the fall in US Treasury yields provided more support to this segment given its higher interest rate sensitivity. High-yield bonds fell 0.4% and spreads widened over the month, particularly among lower-rated issuers.

Source: Bloomberg as at 31 October 2026.

Oil gained in October as markets anticipated a potential escalation of the Iran war following the US midterms. Brent crude rose 14% over the month to US$118 per barrel, its highest level since the spring, despite a rise in exports from the Gulf as producers found alternative routes to sustain supply.

Precious metals had a weaker month, with gold declining 7% to US$3,875 per troy ounce as persistent inflation raised the likelihood that interest rates will stay high, increasing the opportunity cost of holding the non-yielding precious metal. Silver fell 19% to US$49 per ounce. The shares of precious metals producers underperformed gold, with the NYSE Arca Gold Miners Index declining 12% in the month. Total known holdings of gold by exchange traded funds, often seen as a proxy for desire to hold the precious metal, were unchanged.

Industrial metals were generally weaker in October, with the prices of iron ore (-2%), nickel (-4%) and aluminium (-3%) all falling. Copper (-2%), often seen as a bellwether for the global economy, also declined, reflecting concern about the impact on economic activity of higher rates, subdued demand in China, and reduced supply risks following progress in labour negotiations at a major copper mine in Chile. In agriculture, grain prices were weaker partly after the US Department of Agriculture unexpectedly raised its forecasts in the October World Agricultural Supply and Demand Estimates (WASDE) report. Corn (-11%), wheat (-11%) and soybeans (-5%) all fell.

Source: Bloomberg as at 31 October 2026.