Weekly Market Recap

The UK Nationwide House Price Index rose by 0.3% sequentially in October, beating forecasts for no change but slowing from the 0.5% increase posted in September. According to Bank of England data, net mortgage approvals for house purchases—a key indicator of future housing activity—increased by 1,000 to 65,900 in September, the highest level in nine months.

The third-quarter earnings season continued to ramp up, with over one-third of S&P 500 Index companies reporting results, including five of the so-called Magnificent Seven companies. According to data from FactSet, 64% of S&P 500 companies had reported results as of Friday morning, with 83% posting earnings that beat consensus estimates. Reactions to the week’s Magnificent Seven earnings were mixed, with shares of Microsoft, Apple, and Meta Platforms declining after reporting, while Amazon and Alphabet traded higher. Elsewhere, shares of NVIDIA rose and pushed the chipmaker’s market capitalisation over USD 5 trillion midweek, making it the first company ever to cross that threshold.

Heading into the week, much of the attention was on a Thursday meeting in South Korea between US President Donald Trump and Chinese President Xi Jinping to discuss trade relations between the world’s two largest economies. The leaders agreed to a one-year trade truce, which will see a reduction of US tariffs on Chinese imports, a suspension of China’s export controls on rare earth materials, and a resumption of China’s purchases of US soybeans and other agricultural products. While the concessions in the agreement were relatively modest and left room for further escalation of the trade war in the long term, the outcome provided some temporary relief and helped boost sentiment during the week.

The other major event on the calendar for the week was the Federal Reserve’s October monetary policy meeting. On Wednesday, the central bank announced that it would lower its target range for the federal funds rate by 25bps to 3.75%–4.00%, as widely expected.

Notably, however, two policymakers dissented, with Fed Governor Stephen Miran favouring a 50bp cut and Kansas City Fed President Jeffrey Schmid voting to keep rates unchanged. The dissents highlighted the growing divide between Fed officials as they attempt to determine the appropriate path forward amid persistently above-target inflation and a weakening labour market.

Speaking after the meeting, Fed Chair Jerome Powell pushed back against investors who were expecting further easing this year, stating that another rate cut at the central bank’s December meeting “is not a foregone conclusion.” Powell also suggested that, given the lack of economic data due to the ongoing federal government shutdown, policymakers could take a more cautious approach in December.

As expected, the European Central Bank (ECB) kept interest rates unchanged for a third consecutive meeting, as inflation stayed near the 2% target. The central bank reiterated its policy guidance: Decisions will be made meeting by meeting, they will be data-dependent, and there is no pre-commitment to a particular rate path. ECB President Christine Lagarde stated that the inflation outlook remained broadly unchanged and that the economy continued to expand. She also acknowledged that the external outlook remains uncertain, owing particularly to ongoing global trade disputes and geopolitical tensions.

A preliminary estimate showed that annual headline inflation in the eurozone slowed to 2.1% in October from 2.2% in September, in line with economists’ forecasts in a FactSet poll. Lower energy prices offset higher services costs. The core rate, which excludes volatile food and fuel prices, held steady at 2.4%.

Meanwhile, euro area gross domestic product (GDP) expanded by 0.2% in the third quarter, compared to 0.1% in the prior three-month period. The preliminary growth rate was slightly larger than forecast. France and Spain drove the expansion. Separately, the seasonally adjusted unemployment rate was unchanged for a third month in September, holding at 6.3%.

Concerns about China’s longer-term growth intensified after a recent high-level meeting of the country’s leaders failed to yield any significant policy support. Following the end of China’s fourth plenum, a four-day conclave of top Communist Party officials, the government pledged to “form an economic development model driven more by domestic demand and powered by consumption,” Bloomberg reported, citing state media. While analysts said Beijing’s emphasis on consumption was positive, it fell short of targeting a specific level of household consumption in the country’s GDP. China’s household consumption level as a percentage of GDP is currently around 40%, compared to the global average of 56%, according to World Bank data.

The Nikkei 225 Index’s monthly increase of 16.6% in October was the biggest since January 1994. The decision of the Bank of Japan (BoJ) to leave interest rates unchanged, along with hopes for a large-scale economic stimulus package, buoyed sentiment. Strong results from Amazon and higher-than-expected sales forecasts from Apple sparked a rally in technology stocks as well.

At the BoJ’s press conference, Governor Kazuo Ueda apparently maintained his hawkish stance and reiterated that “the likelihood of a rate hike is increasing.” However, he dropped any reference to the underlying inflation rate that he had previously emphasised and instead introduced a new condition for higher borrowing costs. He stressed the need to closely monitor developments ahead of the spring wage negotiations, particularly in the auto industry, which is heavily impacted by tariffs.

The Japanese yen weakened to JPY 154.0 against the US dollar from about JPY 152.9 at the end of the prior week, as hopes for an imminent BoJ rate hike receded. The move also prompted a verbal intervention by new Finance Minister Satsuki Katayama, who said: "The government has been monitoring, with a high sense of urgency, excessive fluctuations and disorderly movements on the currency market, including those driven by speculators." The yield on the 10-year Japanese government bond hovered around 1.65%, little changed from the previous week.

On the economic data front, core consumer prices in Tokyo’s Ku area rose 2.8% year over year (YoY) in October from 2.5% in September, exceeding market forecasts and remaining above the central bank’s 2% target. Meanwhile, retail sales unexpectedly rose 0.5% on an annual basis, rebounding from a 0.9% decline in the prior month. The unemployment rate remained at 2.6% in September, the highest level since July 2024.

Australia's third-quarter headline consumer price index (CPI) rose 1.3% quarter-on-quarter (QoQ), 3.2% YoY, well ahead of the consensus of 3.0% YoY. The trimmed mean measure, which is favoured by the Reserve Bank of Australia (RBA), increased 2.95% YoY, above the market expectation of 2.7% YoY. The acceleration in inflation was due to a pickup in housing and electricity prices. Subsequently, the RBA decided to hold the cash rate unchanged this month. Private sector credit increased 0.6% month-on-month, in line with expectations.

Last week, the MSCI All Country World Index (MSCI ACWI) rose 0.5% (21.6% YTD).

The US S&P 500 Index gained 0.7% (17.5% YTD). Growth stocks strongly outperformed value stocks, while small-cap stocks underperformed large-cap stocks. The Russell 1000 Growth Index returned 1.8% (21.5% YTD), the Russell 1000 Value Index -0.8% (12.1% YTD), and the Russell 2000 Index -1.3% (12.4% YTD). The technology-heavy Nasdaq Composite rallied 2.3% (23.5% YTD), boosted by continued outperformance from the mega-cap technology companies benefiting from artificial intelligence spending. Market breadth was notably narrow, as the S&P 500 Index advanced despite seven of its 11 sectors losing ground, and an equal-weighted version of the index underperformed the market-cap-weighted index by 268bps.

In Europe, the MSCI Europe ex UK Index lost -0.9% (15.3% YTD), after rallying to a fresh high, as expectations for further interest rate cuts from the ECB waned. Most major stock indexes were mixed. Germany’s DAX Index was down -1.2% (20.3% YTD), France’s CAC 40 Index gave back -1.3% (13.6% YTD), and Italy’s FTSE MIB Index put on 1.6% (31.2% YTD). Switzerland’s SMI Index fell -2.7% (8.8% YTD). The euro depreciated against the US dollar, closing the week at USD 1.15 for EUR, down from 1.16.

The FTSE 100 Index in the UK added 0.7% (22.5% YTD), helped partly by the depreciation of the British pound against the US dollar, closing the week at USD 1.32 for GBP, down from 1.33. A weaker pound lends support to the index because many of its companies are multinationals with overseas revenues. The domestically-focused FTSE 250 Index lost -1.5% (10.8% YTD).

Japan’s stock markets climbed to fresh record highs over the week. The TOPIX Index gained 1.9% (21.7% YTD), and the TOPIX Small Index decreased -0.5% (22.8% YTD). 

In Australia, the S&P/ASX 200 Index lost -1.5% (12.9% YTD) due to the accelerated third-quarter CPI, which led the RBA to hold, and the Fed’s hawkish commentary following the October meeting. Australian government bond yields moved higher with the curve flattening as the market repriced the RBA’s rate-cutting path. The Australian dollar strengthened against the US dollar by 0.4%, driven by the improved rate differential.

In Canada, the S&P/TSX Composite lost -0.2% (25.1% YTD).

The MSCI Emerging Markets Index gained 0.9% (33.6% YTD), with the stock markets of Taiwan, South Korea and Brazil contributing positively to the performance. In contrast, the stock markets of China and India contributed negatively.

Mainland Chinese stock markets concluded the week on a mixed note, as concerns about a slowdown in growth outweighed optimism about easing US-China trade tensions. The onshore CSI 300 Index edged down -0.4% (20.9% YTD), and the Shanghai Composite Index edged up 0.1% (20.9% YTD). Hong Kong's benchmark Hang Seng Index pulled back -0.9% (33.4% YTD). The MSCI China Index, which primarily consists of offshore-listed stocks, declined by -1.5% (36.5% YTD).

In Argentina, the country held its midterm legislative elections, and President Javier Milei's La Libertad Avanza (LLA) alliance performed much better than expected. The LLA alliance secured 41% of congressional seats, exceeding consensus expectations of around 35%. Even more surprising, LLA won in the Province of Buenos Aires, where the party had lost by 14 percentage points in recent local elections.

According to Aaron Gifford, T. Rowe Price’s associate director of global sovereign research, a more conciliatory Milei, a fragmented opposition, significant US support—including a USD 20 billion swap line from the US Treasury—and signs of economic and financial distress should Milei lose the election may have all worked in his favour.

Gifford believes that these midterm election results give Milei a renewed political mandate to continue with his ambitious economic programme. This includes additional reforms for the labour market and tax policy, as well as a focus on attracting large-scale private investment. The main sticking point is the government’s currency regime, though Gifford expects additional progress in this area as well. Gifford believes that economic growth is poised to rebound on the back of renewed business and consumer confidence, lower inflation, and a less restrictive monetary policy. In addition, he would not be surprised to see Argentina regaining access to the debt markets before the end of the year.

In Chile, the central bank held its scheduled policy meeting and decided to maintain the monetary policy interest rate at 4.75%. The decision was unanimous among Board members.

According to the post-meeting statement, policymakers noted that global financial markets “have performed favourably” since the last policy meeting, with several Latin American currencies, including the Chilean peso, appreciating and the price of copper—a key Chilean export—rising “significantly, driven in part by global supply constraints and geopolitical factors.”

In the Chilean economy, central bank officials indicated that overall economic activity and demand “have evolved in line with” their forecasts in the September Monetary Policy Report. The picture seems mixed, however. For example, while there were “declines in mining and entrepreneurial services, which are characterised by high volatility,” policymakers noted that “the sustained improvement in wholesale and retail trade and manufacturing performance stands out.” Also, they considered private consumption to be in line with expectations, while investment seems “more dynamic,” particularly concerning machinery and equipment. In addition, the labour market itself is giving “mixed signals, with a slight decline in the unemployment rate and slow job creation.”

While annual headline inflation (4.4%) and core inflation (3.9%) in September were in line with policymakers’ forecasts, central bank officials believe that the current macroeconomic scenario “still poses risks for the future trajectory of inflation” and that they need “to gather more information before continuing the process” of adjusting the monetary policy interest rate so that it reaches a neutral setting—neither stimulative nor restrictive. Therefore, policymakers decided to keep the policy rate unchanged.

Last week, the Bloomberg Global Aggregate Index (hedged to USD) returned -0.2% (4.9% YTD), the Bloomberg Global High Yield Index (hedged to USD) 0.6% (8.6% YTD), and the Bloomberg Emerging Markets Hard Currency Aggregate Index 0.5% (11.2% YTD).

US government securities generated negative returns as yields fluctuated, but ultimately finished the week higher across most maturities. The conclusion of the Fed’s monetary policy meeting on Wednesday, and subsequent hawkish comments from Fed Chair Jerome Powell, drove much of the yield movement. Over the week, the 10-year Treasury yield rose by 8bp, ending at 4.08% from 4.00% (down -49bps YTD). The 2-year Treasury yield increased by 10bps, ending the week at 3.58% from 3.48% (down -67bps YTD).

US investment-grade corporate bonds underperformed Treasuries, and weekly supply came in well above expectations. Meanwhile, sentiment in the high-yield bond market was bolstered by earnings and issuer-specific news, although sentiment turned weaker due to dampened expectations for a December rate cut.

Over the week, the 10-year German bund yield was little changed, ending at 2.63% (up 27bps YTD). The 10-year UK gilt yield decreased by -2bps, ending the week at 4.41% from 4.43% (down -16bps YTD).