The UK equity market fell in October due to budget uncertainties, the US election, and Middle East conflicts.
US equity markets fell after the S&P 500 hit record highs, driven by a tech sell-off following Microsoft’s weak growth outlook
Taiwan saw gains, while Korea struggled due to concerns over Samsung Electronics.
In October, European equity markets declined, though Germany and Italy outperformed. Eurozone Gross Domestic Product (GPD) grew unexpectedly, with stronger-than-expected growth in Germany, while Italy stagnated. Inflation rose to 2%, driven by energy and food prices. In the UK, inflation fell to 1.7%, and the economy grew by 0.2%. US equity markets saw losses due to a tech sell-off, while inflation dropped to 2.4%. Asian markets also struggled, with Japan and China underperforming.
European equity markets gave back some of the previous month’s gains as macro data pointed to a slowing economy. They underperformed other regions, especially China, which benefited from stimulus measures.
Germany and Spain fared well, but French equities lagged due to potential tax hikes. Real estate, materials, and utilities had positive returns, while healthcare, technology, and energy struggled due to lower oil prices.
Eurozone inflation fell to 1.8% in September, and Germany's economy European equities moved lower in October, with Germany and Italy outperforming, while France continued to lag amid fiscal and political uncertainty. Energy was among the better-performing sectors, with oil prices ending a three-month negative run, and financials also outperformed on stronger-than-expected earnings.
Eurozone Gross Domestic Product (GDP) growth in the third quarter exceeded expectations, with a 0.2% expansion in Germany and a 0.4% rise in France.
Headline inflation increased from 1.7% in September to 2.0% in October. Key policymakers, including Christine Lagarde stressed that rate cuts should continue to be gradual to combat inflation. signs of heading into recession.
The UK equity market fell in October due to budget uncertainties, the US election and conflict in the Middle East. Inflation dropped to 1.7%, raising expectations for interest rate cuts. Economic growth was 0.2%, while wage growth slowed. The government budget increased spending by £70 billion, with taxes rising by £36 billion. Consumer confidence declined, though retail sales grew for the third month.
US equity markets posted negative returns after the S&P 500 hit record highs, driven down by a tech sell-off following Microsoft’s weaker growth outlook. The Federal Open Market Committee showed divided opinions on interest rate cuts. The US Consumer Price Index (CPI) inflation fell to 2.4%, boosting expectations for a 25-basis point cut. The labour market added 254,000 jobs, and in the third quarter, the economy grew by 2.8%, signalling strong health.
Asia Pacific equity markets had a negative month, with Japan, China, and India underperforming. Taiwan saw gains, while Korea struggled due to concerns over Samsung Electronics. Indian stocks fell amid disappointing earnings and slowing GDP growth, with the Reserve Bank of India maintaining rates at 6.5%. Australian shares declined, facing slim chances for rate cuts. Chinese equities retreated despite a 4.6% GDP growth in the third quarter. Japan’s market was affected by political uncertainty, while Taiwan’s stocks rose, driven by strong earnings from Taiwan Semiconductor Manufacturing Co (TSMC).
Emerging-market stocks declined, Brazilian equities fell due to declining iron ore prices, and the Central Bank of Brazil maintained its Selic rate at 10.75%. Mexico’s market slightly declined amid high inflation. Turkey and Egypt struggled, while South Africa’s market paused ahead of the US election.
Global bond markets had a challenging month, with US Treasuries down -2.48% and UK gilts falling -2.78% due to rising fiscal concerns. The Federal Reserve is expected to cut rates by 25bps, but strong economic data has tempered future cut expectations. The eurozone saw a 25-basis point (bps) rate cut from the European Central Bank (ECB), while Canadian rates were also reduced. Corporate bonds showed mixed performance, with high-yield bonds faring better in Europe. October saw significant issuance of euro/sterling investment-grade corporate bonds at €43 billion.
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Markets were relatively volatile during the quarter, with investors being pulled between the negatives of geopolitics and weaker industrial demand, and the potential benefit of lower interest rates.
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