Global Markets Weekly Update

U.S.

Major U.S. stock indexes finished the week mixed as investors weighed a weaker-than-expected jobs report and declining expectations for a Federal Reserve rate hike against elevated Treasury yields, volatile oil prices, and ongoing uncertainty surrounding the U.S.-Iran conflict. Of the major benchmarks, the Nasdaq Composite and S&P MidCap 400 Index advanced, while the Dow Jones Industrial Average and S&P 500 Index declined. The Russell 2000 Index was little changed. Treasury yields also remained a key focus during the week, with long-term yields reaching multi-decade highs before retreating some later in the week.  

Job growth slows, unemployment ticks higher in September  

On Friday, the Bureau of Labor Statistics (BLS) reported that the U.S. economy added 29,000 jobs in September, well below consensus expectations for around 90,000 and down from August’s downwardly revised gain of 133,000. July and August payrolls were revised down by a combined 60,000, with July now showing a loss of 10,000 jobs. The unemployment rate ticked up to 4.2% from 4.1%, and labor force participation was little changed at 61.8%. Stock futures advanced and Treasury yields decreased following the release on Friday morning, while markets tracked by the CME FedWatch Tool implied a drop in expectations for a rate hike at the Fed’s October meeting.  

Earlier labor market data had offered mixed signals. Private payrolls firm ADP reported that private employers added 90,000 jobs in September, up from August’s revised reading of 36,000, while BLS data showed that job openings declined to 7.08 million in August from a revised 7.34 million in July. Meanwhile, initial jobless claims remained subdued at 197,000, little changed from the prior week, and continuing claims fell by 11,000 to 1.701 million. The Conference Board’s measure of consumers’ perceptions of labor market conditions also weakened to its lowest level in more than five years.  

PCE inflation holds steady; second-quarter GDP revised higher 

The Bureau of Economic Analysis (BEA) reported that its personal consumption expenditures (PCE) price index rose 0.3% in August and 3.4% over the prior 12 months. Core PCE inflation—which excludes food and energy—increased 0.2% for the month and 3.0% year over year. Both the headline and core PCE annual inflation figures were unchanged from July’s revised readings.  

The BEA also revised second-quarter real gross domestic product (GDP) growth up to a 2.2% annualized rate from 1.5%, primarily reflecting higher levels of investment, consumer spending, and government spending. Real final sales to private domestic purchasers—a measure of underlying private demand—increased at a 4.6% annualized rate, up from a previous estimate of 4.2%. 

Manufacturing activity expands as input cost pressures rise

Manufacturing activity remained in expansion territory in September, according to the Institute for Supply Management. Its manufacturing Purchasing Managers’ Index (PMI) registered 54.5, little changed from August and marking a ninth consecutive month of expansion (readings above 50 indicate expanding activity). New orders and employment strengthened, but the prices index jumped 6.8 points to 77.9, its highest reading since May.

 

Europe

The pan-European STOXX Europe 600 Index ended the week down 1.14% in local currency terms. European equities were volatile as elevated oil prices and rising sovereign bond yields appeared to weigh on investors' risk appetite. Stronger-than-expected inflation data reinforced concerns that monetary policy could remain restrictive. Among major stock indexes, Germany’s DAX closed 0.70% lower, France’s CAC 40 Index declined 2.24%, and Italy’s FTSE MIB fell 2.67%. The UK’s FTSE 100 Index slid 2.18%. 

Energy and bond yields remain key regional market drivers 

Oil and interest rates continued to exert a strong influence on European equities. Brent crude moved above USD 108 per barrel early in the week as hopes for progress in U.S.-Iran negotiations faded, reinforcing concerns around inflation and pushing sovereign borrowing costs higher. Oil subsequently eased as crude flows through the Strait of Hormuz improved. Bond yields, however, remained elevated, suggesting that concerns about inflation, real rates, and fiscal sustainability extended beyond movements in energy prices alone. 

Inflation pressures build across Europe 

September inflation readings generally surprised to the upside, reinforcing expectations that the European Central Bank may need to maintain restrictive monetary policy. Annual inflation in the eurozone accelerated to 3.8% in September, up from 3.2% in August and higher than the 3.6% that had been expected. Inflation accelerated to 3.3% in Germany, 3.0% in France, 4.9% in Spain, and 4.1% in Italy. Inflation data added to pressure on bond markets and rate-sensitive areas of the equity market. 

French fiscal concerns weigh on sentiment 

France became an increasingly important source of country-specific risk. The government presented a 2027 budget aimed at reducing the fiscal deficit to 5% of GDP, but uncertainty over parliamentary approval contributed to renewed investor concerns about the public finances. French borrowing costs rose sharply. The S&P Global France Manufacturing PMI slipped to 50.6 in September, down from 51.1 the previous month.  

UK growth revised higher

Revised data showed that the UK economy expanded 0.5% in the second quarter, slightly stronger than the previous estimate of 0.4%, with services remaining the principal driver of growth. Still, elevated gilt yields continued to create a challenging backdrop for rate-sensitive sectors and kept attention focused on borrowing costs and the outlook for fiscal policy. The S&P Global UK Manufacturing PMI rose to 51.9 in September. This was higher than the 51.7 registered in August.

Japan

Japan’s stock market returns were mixed over the week, with the Nikkei 225 Index advancing 2.93%, while the broader TOPIX Index fell 0.91%. Gains were concentrated in artificial intelligence (AI)- and semiconductor-related shares, supported by strength in global chip stocks and renewed optimism around demand for AI infrastructure. Broader sentiment was more subdued amid elevated bond yields and expectations for further Bank of Japan (BoJ) tightening, reinforced late in the week by a hotter-than-expected Tokyo-area inflation print.  

BoJ divided over pace of further tightening

The BoJ’s Summary of Opinions from its September monetary policy meeting, where the central bank raised its policy rate to its highest level since 1995, highlighted differing views over the pace of further tightening. One board member argued that the central bank may need to accelerate the pace of rate hikes if signs of an upward deviation in prices are observed, while another favored bringing the policy rate closer to its approximate goal relatively soon. A more cautious view, however, was that underlying inflation was expected to reach 2% without accelerating at a pace that risked leaving the BoJ behind the curve, meaning there was no need to take hasty action. With the discussion tempering some expectations for an immediate follow-up hike in October, the yield on the 10-year Japanese government bond remained elevated but ended the week broadly unchanged at around 3.09%. 

The yen traded around JPY 157 against the U.S. dollar for much of the week. Finance Minister Satsuki Katayama reiterated that the currency’s undervaluation was problematic and said that Japan and the U.S. would strengthen cooperation on foreign-exchange matters. Prime Minister Sanae Takaichi later said she had raised similar concerns with U.S. President Donald Trump, while emphasizing that stronger growth and competitiveness would help underpin confidence in the yen. 

Tokyo-area inflation accelerates 

The BoJ’s September Tankan survey showed that sentiment among large manufacturers improved to +24 from +22 in June, although this was slightly below the +25 market consensus, while sentiment among large nonmanufacturers eased to +35 from +37. Separate data showed that Tokyo-area consumer inflation accelerated sharply in September, reinforcing expectations that the BoJ is likely to tighten policy further. The core consumer price index rose 2.7% year over year, up from 1.8% in August and above the consensus forecast, while inflation excluding fresh food and energy rose to 3.0% from 2.0%. Elsewhere, industrial production fell 1.7% month over month in August, against expectations for an increase, highlighting some underlying weakness in activity. 

China

China equities pulled back over the week, with mainland markets closed on Thursday and Friday for the Golden Week holiday. In the week through Wednesday, the Shanghai Composite Index fell 1.15% in local currency terms, while the CSI 300 Index ended down 1.80%, according to FactSet data. Information technology stocks led the decline. Domestic semiconductor names retreated on worries about intensifying competitive pressures on speculation that Beijing may allow companies to buy NVIDIA chips, while reports of potential U.S. restrictions weighed on shares of optical equipment makers. Meanwhile, the Hang Seng Index slumped 2.19%, suffering heavy losses on Friday as the Hong Kong market reopened following Thursday’s closure. Financials and technology stocks were among the biggest laggards, hurt by rising U.S. bond yields and disappointment over Beijing’s latest stimulus package. 

Stimulus package underwhelms investors 

Chinese authorities rolled out a fresh raft of policy support to reverse a monthslong moderation in economic momentum, after the State Council pledged to introduce “practical and effective additional policies.” Key measures included subsidies on mortgage interest payments for qualified first-time homebuyers. Beijing also unveiled steps to encourage banks to increase lending to targeted sectors. The People’s Bank of China cut the interest rate on its pledged supplementary lending (PSL) facility, which provides low-cost financing to selected policy banks to fund investment, while expanding the sectors eligible for PSL financing. The central bank also increased the quota for its relending program supporting technological innovation upgrading.  

Overall, the measures represent China’s biggest stimulus package since 2024 and could help ensure the achievement of the 4.5% to 5% economic growth target this year. However, some market participants felt that the measures may not be sufficient to address the economy’s structural imbalances of sluggish domestic demand and growing export reliance. 

Business surveys show pickup in activity in September 

China’s official manufacturing PMI increased to 50.1 in September from 49.8 in August, returning to expansion for the first time in three months. Production accelerated at its fastest pace this year, helping to offset a modest moderation in the pace of new order growth. The improvement was also reflected in the private sector RatingDog manufacturing PMI, which climbed to a five-month high of 52.1 in September from 51.5 in August as output and new orders both rose. 

Outside the manufacturing sector, the official nonmanufacturing PMI rose to 50.2 in September from August’s 49.0. The services sector returned to growth, while construction activity expanded for the first time in 2026. Meanwhile, the RatingDog services PMI came in at 51.6 in September, up from 51.4 in August, thanks to greater new business inflows.  

Other key markets

Colombia 

Surprise rate hike and fiscal concerns pressure Colombian markets 

Colombian assets came under pressure during the week as investors weighed renewed fiscal concerns against a surprise interest rate increase from Banco de la República. Fiscal policy remained an important driver after the government confirmed discussions with the International Monetary Fund (IMF), including potential financing options, as it seeks to address rising borrowing needs and a widening budget deficit. The government has also requested an IMF technical mission as part of its efforts to develop a fiscal adjustment plan. 

Monetary policy moved into focus on Wednesday, when Banco de la República unexpectedly raised its benchmark interest rate by 25 basis points (0.25 percentage points) to 12.25%, the highest level since early 2024. Four policymakers supported the increase, two preferred to hold rates steady, and one favored a 50-basis-point hike. The central bank pointed to persistent inflation pressures, with headline inflation rising to 6.2% year over year in August, while core inflation excluding food and regulated items increased to 6.1%. The decision reinforced the bank’s restrictive policy stance even as recent activity and labor market data have shown some signs of cooling.  

Brazil 

Election uncertainty drives volatility in Brazilian markets

Brazilian equities advanced over the week, although trading was volatile as investors positioned ahead of Sunday’s presidential election. The Ibovespa received support at different points from financial and oil-related shares, while the real fluctuated amid domestic political uncertainty and swings in the U.S. dollar, global bond yields, and oil prices. Polling continued to point to a closely contested race between President Luiz Inácio Lula da Silva and Senator Flávio Bolsonaro, with a runoff remaining possible.  

Domestic data presented a mixed backdrop for monetary policy. Brazil created a stronger-than-expected 165,827 formal jobs in August, led by services and construction, underscoring continued labor market resilience even as broader economic momentum moderated. At the same time, signs of financial strain persisted, with the delinquency rate on non-earmarked loans reaching a record 6.6% in August. Fiscal concerns also remained in focus after central bank data showed gross government debt rising to 82.9% of GDP, largely reflecting higher interest expenses. Taken together, resilient employment alongside elevated fiscal and credit pressures complicated the outlook for further central bank easing.