Global equities made modest gains in the third quarter, supported by resilient growth and robust earnings, which outweighed concerns around geopolitics and rate hikes. Developed markets outperformed, in particular US equities. The S&P 500 reached a new record in August, lifted by the Magnificent Seven on the back of a broadly strong earnings season and a rotation from semiconductors towards hyperscalers and software companies. A further re-escalation in the US-Iran conflict in September tempered risk appetite, however, with Brent crude up by 42% from its end-June lows, reviving inflation concerns.

European equities lagged. Despite the benchmark Stoxx 600 also hitting a record in August, it ended the quarter in the red, as rising bund yields and energy-driven inflation concerns weighed heavily in September. South Korea was among the weakest markets, falling more than 20% after an extremely strong second quarter, as it bore the brunt of the July unwind in global semiconductor stocks. At the sector level, energy benefited from the spike in oil prices, while strong earnings lifted tech stocks. Utilities and real estate stocks were among laggards given the surge in bond yields.

Source: Bloomberg as at 30 September 2026.

US equities ended a volatile third quarter higher, with several indices hitting records. Performance diverged beneath the surface, however: the S&P 500 and Nasdaq gained, while the Dow Jones and the equal-weighted S&P 500 slipped as rising borrowing costs and weaker consumer sentiment weighed on more interest rate- and economically sensitive companies. Weakness in small caps pointed to broader pressure beyond the largest listed companies.

Markets were pulled in two directions: continued support from corporate earnings and AI-related investment, against rising oil prices, inflation concerns and bond yields. Semiconductor and memory stocks came under pressure early in the quarter as investors questioned the durability of AI spending, a concern compounded by new developments in Chinese AI. Technology subsequently recovered on robust earnings, helping the Nasdaq regain ground.

The breakdown of the US-Iran ceasefire disrupted shipping through the Strait of Hormuz and pushed oil prices higher, adding to energy costs and inflation concerns. US Treasury yields rose sharply, tightening financial conditions and adding to pressure on rate-sensitive parts of the equity market. Energy was the clear standout among sectors, followed at some distance by information technology, communication services, health care and financials. Consumer discretionary and consumer staples declined.

South African equities ended the quarter marginally lower, with early gains unwinding in September. The FTSE/JSE All Share Index fell 0.3%: a rotation into precious metals lifted resources 12.8% over the quarter, but a rate hike by the South African Reserve Bank (SARB), surging oil prices and rising global yields weighed on markets in September.

The SARB raised the repo rate by 25bps to 7.25% (prime 10.75%) on 23 September in a unanimous vote, resuming the tightening cycle after an unexpected hold in July. Headline inflation then slowed sharply to 4.3% year-on-year in July, from 5.0% in June and below consensus expectations of 4.4–4.5% as fuel and food prices eased. The August print edged up to 4.4% year-on-year, again below consensus, but rising oil prices stemming from the Middle East conflict threaten to push inflation higher in the months ahead. In September, the SARB struck a hawkish tone, citing the need to bring inflation back toward its 3% target and prevent higher levels becoming entrenched.

In fixed income, the 10-year government bond yield rose above 9% towards quarter-end, its highest since April, as oil prices surged after the US rejected Iran’s proposal to reopen the Strait of Hormuz – intensifying concerns over inflation and interest rates. The rand followed a similar path. It traded below R16.00/USD in August, supported by a softer US dollar, strong gold and platinum prices, and favourable carry, but much of that strength unwound in September as the oil shock, Federal Reserve (Fed) tightening and expectations of a SARB hike weighed on sentiment.

South Africa’s growth backdrop also softened. GDP data released in September showed the economy contracted 0.2% quarter-on-quarter, ending six consecutive quarters of expansion and adding a growth headwind to the rate shock.

Source: Bloomberg as at 30 September 2026.

Chinese equities endured a challenging and volatile quarter, with the onshore-offshore pattern that defined much of 2026 suddenly inverting in July. Mainland A-shares, which had been the steadier segment in the first half, bore the brunt of the global AI trade unwind as semiconductor and hardware names were caught in a broader reassessment of AI valuations. Hong Kong, by contrast, had its strongest month of the year after China approved Apple Intelligence running on Alibaba's Qwen model.

August partly restored the familiar dynamic, as mainland markets recovered modestly on domestic liquidity, renewed interest in AI-adjacent and technology names, and a more supportive export backdrop, while offshore markets consolidated July's gains, as the Qwen catalyst faded. September brought the sharpest reversal, as surging oil prices, US Treasury yields and a firmer dollar weighed on both markets, given China’s position as the world’s largest oil importer.

Activity data improved, with the official PMI rising to 50.1 in September from 49.8 in August, in line with consensus, with foreign sales growing at their fastest pace in seven months. This offers some grounds for optimism heading into the fourth quarter, although property weakness, subdued consumer confidence and a more challenging global monetary environment remain.

Emerging market equities ended the quarter slightly weaker, with the MSCI EM Index falling 0.4% in US dollar terms. The headline figure, however, obscures a very volatile period with wide dispersion across countries and factors. The quarter fell into three phases: a July unwind of the AI trade alongside a re-escalation in the US-Iran conflict, a strong August recovery driven by AI earnings momentum, and a deteriorating macro backdrop in September, with another escalation in the Middle East and the sharpest monthly bond sell-off in years.

North Asia was the epicentre of the volatility. South Korea absorbed the July AI unwind and recovered only partially, ending the quarter deep in the red despite remaining among the strongest markets of the year in absolute terms. Taiwan was more resilient and ended with a healthy gain, as TSMC’s earnings durability provided a floor. In China, offshore markets outperformed as July’s Apple Intelligence catalyst drove a rotation into Hong Kong-listed internet and platform names, while mainland onshore markets suffered from persistent weakness in domestic demand.

The oil shock was the quarter's other defining force, redistributing returns between exporters and importers. India lagged despite a positive start, as oil import costs and rising global yields proved persistent headwinds. Elsewhere, Brazil gained on direct earnings leverage to higher energy prices. In Central and Eastern Europe, Poland was the standout, as European macro resilience, energy security themes and AI-adjacent industrial exposure attracted steady inflows.

European markets performed well during the quarter, posting their strongest quarter since 2020. The weakening oil price helped to ease concerns around inflation – a key driver of sentiment given the continent’s exposure to the energy crisis. The ECB delivered its first rate hike since 2023, with a 25bp increase in June that took its deposit rate up to 2.25%. President Lagarde also noted how the inflation shock was becoming broader in nature, but said the decision was based on the bank’s projections rather than anything pre-emptive. Looking at individual sectors, tech broadly benefited from positive AI sentiment spilling over from strong US tech earnings. Financials and industrials were also bright spots, while energy was a notable laggard.

The UK equity market had a positive quarter, though the benchmark FTSE 100 posted more modest gains than global markets given its weighting towards oil companies, which came under pressure after the US and Iran agreed to open the Strait of Hormuz. The FTSE 250, however, posted robust gains more in keeping with the broader rally, helped by positive inflation and GDP releases. It wasn't all plain sailing, however. On the political front, there was some significant unrest following poor local election results earlier in May, which triggered the resignation of the Prime Minister and, by extension, speculation about the direction any future administration could take. Another notable piece of news was UK dealmaking, with foreign acquisitions of London-listed businesses on track for their strongest year in almost two decades, helped by depressed valuations and continued international appeal.

US

US Treasury yields rose sharply over the quarter as oil-driven inflation concerns and resilient data led the US Federal Reserve (Fed) to its first rate hike since 2023; the 10-year closed the quarter at 5.28% (its highest since 2007), and the 30-year at 5.63% (its highest since 2002). Renewed escalation in the US-Iran conflict in July sent Brent crude from around US$70 to over US$100 a barrel and lifted inflation expectations, despite a softer June CPI print. In tandem, heavy Treasury issuance and fiscal deficit concerns drove a sell-off in longer-dated bonds, which an expanded long-bond buyback programme only briefly steadied.

The Fed turned more hawkish as the quarter progressed: three members dissented in favour of a hike in July, and Chair Warsh signalled at Jackson Hole that further tightening may be needed, lifting front end yields. In September, the Federal Open Market Committee raised rates by 25bps to 3.75%-4.00% in a unanimous vote, alongside a more hawkish dot plot. Economic data remained strong, with August core CPI and payrolls both beating expectations and fuelling bets on a Q4 hike. Markets are pricing in three further hikes by mid-2027, despite a downward revision to inflation announced at the end of September.

Europe

European sovereign bond yields rose markedly over the quarter, driven by a renewed energy price shock, a hawkish European Central Bank (ECB) and rising political risk. The 10-year bund yield closed the quarter at 3.60%, its highest level since 2009. The escalation of the US-Iran conflict in July sent oil prices sharply higher, leaving energy-dependent Europe particularly exposed after a softer June inflation print had briefly eased concerns.

The ECB held rates at 2.25% in July but maintained a firmly hawkish tone, with Executive Board member Isabel Schnabel arguing in August that further tightening would be needed. In September, the ECB lifted the deposit rate by 25bps to 2.50%, warning of an extended period of inflation well above target and upgrading its growth forecasts. Resilient data, including a stronger-than-expected Q2 GDP print and a three-year high in the September composite PMI, reinforced expectations of a hike. Fiscal and political uncertainty added further pressure, with concerns over France’s fiscal deficit and its 2027 presidential election pushing the Franco-German 10-year spread to 127bps, its widest since the 2012 euro crisis. Markets ended the quarter pricing in three hikes by mid-2027.

UK

UK gilt yields rose across the curve over Q3, with the 10-year and 30-year touching multi-year highs in September. Tensions between the US and Iran escalated in July, pushing oil back above US$100 per barrel and fuelling a global bond sell-off, with long-dated gilts under further pressure from fiscal deficit and issuance concerns. Inflation reaccelerated, with CPI climbing from 2.6% to 3.1% over the quarter. The fiscal outlook remained in focus for investors as Andy Burnham succeeded Sir Keir Starmer as Prime Minister in July. The Bank of England (BoE) held rates at 3.75% at both its July and September meetings, although in September it signalled that inflation risks were skewed to the upside and monetary policy may have to tighten. Markets ended the quarter pricing in a likely rate hike in November.

Japan

Japanese government bond yields rose in Q3 on growing expectations of a Bank of Japan (BoJ) rate hike and the broader global bond sell-off, with the 2-year and 10-year yields ending the quarter at or near their highest levels since the mid-1990s. The Bank of Japan (BoJ) held rates in July before hiking by 25bps in September, taking the policy rate to 1.25%, its highest since 1995. However, the decision struck a more dovish tone than expected, with two dissents in favour of holding rates. Markets nonetheless continued to price further tightening, despite slower Q2 GDP growth, as rising energy costs and a weak yen raised inflation concerns. The yen was a key focus throughout the quarter, after coordinated intervention by Japan and the US lifted it from its weakest level in around four decades against the US dollar, before it drifted back to 157.

Source: Bloomberg as at 30 September 2026.

Credit markets delivered a mixed third quarter, as a sharp rise in sovereign bond yields drove a clear divide between floating-rate and fixed-rate assets. Floating-rate markets posted positive returns across the board, while fixed-rate assets ended the quarter in negative territory.

Sovereign bond yields rose sharply as a renewed flare-up in the US-Iran conflict pushed Brent crude above US$100 per barrel, reigniting inflation fears. Fiscal deficit concerns and Fed Chair Warsh’s hawkish tone at Jackson Hole added further pressure, while September brought little relief as the Fed’s rate hike and the prospect of higher-for-longer rates weighed on longer-duration assets.

Collateralised loan obligations (CLOs) and leveraged loans were the standout performers, with their floating-rate coupons insulating investors from rising yields. Lower-rated CLO tranches led in both the US and Europe, benefitting from higher carry and spread tightening, while higher-rated tranches lagged but still delivered positive total returns. US loans outperformed European loans, as US spreads tightened while European spreads widened amid concerns over growth prospects for the region.

Among fixed-rate markets, high yield and bank capital bonds (AT1s) held up best, as shorter duration and higher carry cushioned some of the impact from the sovereign sell-off, although total returns were negative. Within high yield, credit quality was a key differentiator: the lowest-rated issuers (CCC and below) suffered as spreads widened sharply on rising refinancing costs.

Investment grade was the weakest performer, as its longer duration left it most exposed to rising yields, while spreads widened slightly. Unlike in high yield, the highest-quality issuers fared worst, as they offered little spread buffer. European corporates outperformed US peers, which were weighed down by heavy issuance from AI hyperscalers. US agency mortgage-backed securities (MBS) also lagged; spreads were broadly unchanged, but the market's long-duration profile left it sensitive to rising Treasury yields.

Emerging market (EM) fixed income posted negative returns in the third quarter, as a global bond sell-off weighed on markets, with the 10-year US Treasury yield closing at its highest level since 2007. Renewed tensions in the US-Iran conflict, including attacks on Saudi energy infrastructure, drove Brent crude oil prices above US$100 a barrel and reignited stagflation fears. The US Federal Reserve turned increasingly hawkish over the quarter and delivered its first rate hike since 2023 in September, signalling another increase before year-end. Fiscal concerns weighed on longer-dated bonds, while growth remained resilient throughout the quarter, further fuelling expectations of a rate hike. The European Central Bank and Bank of Japan also raised rates, while European sovereign bonds sold off sharply. The US dollar had a volatile quarter, drifting lower before rebounding in September following the rate decision. Despite this backdrop for global markets, EM fixed income was mostly resilient, with spreads still tighter year-to-date.

The local currency debt market (JPMorgan GBI-EM GD) fell 0.9% over the quarter in US dollar terms. Both local bonds and EM FX detracted, driven by the global bond sell-off and the US dollar’s rebound in September. Central and Eastern European markets drove negative returns, with Hungary and Poland among the weakest performers as their reliance on energy imports left them exposed to higher oil prices and investors increasingly priced in rate hikes. At a country level, Chile was the top detractor, as higher-than-expected inflation weighed on rates, while the peso weakened given the reduction in copper exports. Local currency frontier markets were the standout, returning 3.8%.

The hard currency sovereign debt market (JPMorgan EMBI GD) declined by 3.9%, driven by the sharp rise in US Treasury yields over the quarter. The investment grade market (-4.6%) underperformed high-yield issuers (-3.2%), given its greater sensitivity to US Treasury moves. From a country perspective, Argentina led underperformance, as investor concerns rose over policy continuity ahead of the elections next year, with President Milei’s popularity dipping.

The EM corporate debt market (JPMorgan CEMBI BD) fell 1.8%, with the investment-grade and high-yield segments declining 2.3% and 1.1%, respectively. As in the sovereign market, the rise in US Treasury yields was the driver of negative returns, with the higher-duration investment-grade market most affected, while the contribution from spreads was positive at the index level.

Source: Bloomberg as at 30 September 2026.

Broad commodity indices rose in Q3, reversing the prior quarter's declines, as conflict re-escalated in the Middle East. Brent crude rose 42%, ending the quarter at US$104 per barrel, as renewed strikes on shipping and energy infrastructure further disrupted flows through the Strait of Hormuz, a route that previously carried around a fifth of the world's oil and liquefied natural gas. Iran's proposal to reopen the strait was rejected by the US late in the quarter, driving another spike in Brent prices.

Gold rose 4% over the quarter to end at US$4,157 per Troy ounce, as central banks kept up an elevated pace of buying after a record Q2. Total known holdings of gold by exchange-traded funds – a proxy for investor appetite for the precious metal – rose 4%, reversing the decline seen over the previous quarter. Gold-mining equities outperformed the metal itself, with the NYSE Arca Gold Miners Index up 17%. Among other precious metals, platinum gained 10%, silver was up 2% and palladium was unchanged.

Copper extended its 2026 rally, rising 8% and hitting new record highs during the quarter, amid continued US stockpiling ahead of a pending tariff decision on refined copper imports. Weather-related disruption to copper mines in Chile, which produces about a fifth of the world’s copper, added to upward price pressure. Among other industrial metals and bulks, zinc and aluminium rose 8% and 3% respectively, while iron ore fell 4%.

Agricultural commodities rebounded from Q2's declines. Corn, wheat and soybean prices all rose sharply (up 21%, 16% and 16% respectively) as drought conditions across parts of Europe and the US eroded hopes for a strong harvest, while renewed Chinese demand for US soybeans and unsettled South American planting weather added further support later in the quarter.

Source: Bloomberg as at 30 September 2026.