Weekly Market Recap

Equity markets

Last week, the MSCI All Country World Index (MSCI ACWI) lost -0.3% (11.6% YTD).

The S&P 500 Index finished the week down -0.6% (11.7% YTD) as large-cap growth and artificial intelligence (AI)-related stocks sharply reversed early-week gains, while small-cap and value-oriented stocks outperformed. Large-cap value stocks outperformed their growth counterparts for the fourth consecutive week. The Russell 1000 Growth Index returned -1.7% (-0.2% YTD), the Russell Value Index 0.5% (24.5% YTD), and the Russell 2000 Index 1.3% (14.5% YTD). The technology-heavy Nasdaq Composite fell -2.0% (10.0% YTD).

AI-related stocks rallied early in the week, rebounding from the prior week’s declines as some upbeat earnings results, funding announcements, and generally favourable management commentary helped renew optimism surrounding demand and capital spending. However, the rally reversed course late in the week as quarterly results from several major technology companies—including Alphabet and Amazon—reignited concerns surrounding sustainability and potential returns on large-scale capital expenditures.  

Oil price volatility continued as hopes for US-Iran diplomacy competed with reports of potential additional attacks and expectations that military activity could escalate after the 3 November US midterm elections.  

In Europe, the MSCI Europe ex-UK Index gained 2.0% (10.7% YTD). Sentiment in European markets was shaped largely by the ongoing corporate earnings season, Middle East developments, and the ECB’s decision to hold interest rates steady. Among major stock indexes, Germany’s DAX Index climbed 2.5% (5.4% YTD), France’s CAC 40 Index rallied 2.4% (0.7% YTD), and Italy’s FTSE MIB Index rose 1.9% (13.6% YTD). Switzerland’s SMI surged 2.4% (15.1% YTD). The euro was little changed against the US dollar, closing the week at USD 1.12 per EUR.

Energy companies reported particularly strong results, while financials were more mixed, with some banks under pressure from softer net interest income and funding-cost trends. Autos remained challenged by competition from China and profitability concerns. More broadly, investors appeared increasingly unwilling to reward merely “in-line” results, potentially making guidance and 2027 outlooks especially important.

The FTSE 100 Index in the UK put on 0.4% (10.9% YTD), while the FTSE 250 Index of smaller companies added 0.9% (11.8% YTD). The British pound was stable against the US dollar for the week, closing at USD 1.34 per GBP.

Japan’s stock markets were little changed over the week. The TOPIX Index was flat (18.8% YTD), as was the TOPIX Small Index (16.8% YTD). Sentiment toward AI shaped the week: Renewed optimism, supported by gains in US technology shares and corporate results, lifted equities through midweek, before concerns about the sustainability of AI-related capital spending prompted a sharp sell-off on Friday. Defensive and domestically oriented sectors tended to lag when AI sentiment recovered and held up better when it weakened.

In Australia, the ASX 200 Index rose 1.3% (6.1% YTD) supported by financials, consumer discretionary, energy and real estate sectors. Australian government bond longer-term yields decreased, with the curve modestly flattening, as global risk sentiment softened. The Australian dollar remained largely unchanged against the US dollar.

In Canada, the S&P/TSX Composite finished the week down -0.4% (14.4% YTD).

Emerging markets and other markets

The MSCI Emerging Markets Index ended the week down -0.7% (13.8% YTD). South Korea and India contributed positively to performance while China, Taiwan and Brazil weighed on performance.

Chinese equities ended the week mixed as a deepening sell-off in mainland technology shares contrasted with a Friday rebound in Hong Kong. The CSI 300 Index, the main onshore benchmark, dropped -2.9% (-12.1% YTD), while the Shanghai Composite Index fell -2.4% (-7.4% YTD). Hong Kong's benchmark Hang Seng Index added 0.9% (-6.5% YTD). Semiconductor and other AI-related shares remained under pressure amid concerns over valuations and the returns on substantial AI investment. The decline intensified on Friday following renewed weakness in US technology shares, with mainland semiconductor and AI-related stocks among the main laggards. In contrast, Hong Kong's benchmark gained 1.5% on Friday, supported by recoveries in consumer, financial, energy, property, and selected internet shares. The MSCI China Index, which primarily comprises offshore-listed stocks, lost -0.4% (-17.3% YTD).

In Brazil, financial markets fell sharply during the week after President Luiz Inácio Lula da Silva’s unexpected re-election in Sunday's presidential runoff, raising concerns about the country's fiscal outlook and future economic policies. Lula secured 51.8% of the vote, defeating conservative challenger Flávio Bolsonaro, whose victory investors had increasingly anticipated following his first-round lead. The result triggered an abrupt unwinding of positions accumulated in anticipation of a more fiscally conservative administration. The benchmark Ibovespa Index plunged nearly 14% on Monday, triggering a temporary trading halt, while the Brazilian real fell approximately 8% against the US dollar and local interest rate swaps surged. Selling pressure continued through much of the week, although some investors viewed the sharp declines as an overreaction.

Fiscal policy remained the dominant concern as investors assessed the administration's response to the market turmoil. Finance Minister Dario Durigan signalled plans to pursue a larger primary budget surplus next year, while the Treasury conducted BRL 31.6 billion in bond repurchases to help stabilise trading conditions. The fiscal challenge was underscored by data showing federal public debt climbed to BRL 9.38 trillion in September, driven largely by elevated interest costs. While a more fiscally conservative Congress could constrain additional spending, investors remained focused on the credibility of future fiscal measures and the administration's upcoming economic appointments. T. Rowe Price’s emerging markets debt team believes the 26 October sell-off in Brazilian fixed income was excessive relative to the change in underlying fundamentals, with bond prices falling below levels seen over the summer when a Lula victory was more fully reflected in market pricing.

Fixed income markets

Last week, the Bloomberg Global Aggregate Index (hedged to USD) returned 0.4% (0.3% YTD), the Bloomberg Global High Yield Index (hedged to USD) 0.4% (0.8% YTD), and the Bloomberg Emerging Markets Hard Currency Aggregate Index 0.3% (-0.9% YTD).

US Treasuries posted positive returns for the week, with yields across most maturities rising ahead of the Fed’s policy announcement before falling sharply after the decision and amid the late-week tech selloff. Over the week, the 10-year Treasury yield decreased by -7bps to 4.93% from 5.00% (up 76bps YTD). The 2-year Treasury yield decreased by -7bps, ending the week at 4.59% from 4.68% (up 112bps YTD).

US investment-grade corporate bonds also generated positive returns, while T. Rowe Price traders noted that year-to-date new issuance in that market reached a record high during the week, supported by a surge in AI-related capital investment financing.

Over the week, the 10-year German Bund yield declined by -2bp to 3.32% from 3.34% (up 47bps YTD). The 10-year UK gilt yield decreased by -8bps to 5.28% from 5.36% (up 81bps YTD).