By Jan Faure
Global equity markets extended their rally in October, with major indices reaching record highs. The continued surge in artificial intelligence-related investments, easing trade tensions between the US and China, and another strong US earnings season provided a solid foundation for gains. Investors have also rotated into other markets, notably Japan and emerging markets, seeking opportunities beyond the heavily weighted US large-cap tech sector.
United States
US equities posted another month of gains, supported by softer inflation data, improving trade prospects, and expectations of further monetary easing. The S&P 500 rose +2.3% for the month, while the Nasdaq surged +4.7% MoM, marking its seventh consecutive positive month. Optimism around AI-driven growth and better-than-expected Q3 earnings from US corporates helped sustain momentum.
The Federal Reserve delivered a widely anticipated 25bps rate cut, lowering the target range to 3.75%–4.00%, the lowest level in three years. While the move was welcomed by markets, Fed Chair Jerome Powell tempered expectations for further near-term easing, citing a “less dynamic and somewhat softer” labour market. The ongoing US government shutdown, now entering its second month, has delayed key economic data releases, leaving policymakers with limited visibility. Powell emphasized that a December rate cut is “far from a foregone conclusion,” adding uncertainty to the Fed’s policy trajectory.
Europe
The European Central Bank (ECB) held rates steady for a third consecutive meeting, maintaining the deposit rate at 2%. ECB President Christine Lagarde described the current policy stance as being in a “good place,” with decisions remaining data-dependent. Eurozone inflation came in at 2.2% in September, just above the ECB’s target, while Q3 GDP growth of +0.2% exceeded expectations. The ECB struck a cautiously optimistic tone, citing reduced downside risks following the summer’s EU–US trade agreement, a Middle East ceasefire, and progress in US–China negotiations.
Asia
Japan’s equity markets rallied sharply, with the Nikkei 225 soaring +16.6% in October (+31.4% YTD), driven by investor optimism over the election of Prime Minister Sanae Takaichi. Her expected focus on economic stimulus and increased defence spending has boosted sentiment. The Bank of Japan kept rates unchanged, maintaining its accommodative stance amid continued yen weakness.
Commodities
Gold retreated from an intra-month all-time high of US$4,381/oz, closing October at US$4,002/oz, a gain of +3.7% month on month. Year-to-date, the metal is up +52%, supported by central bank buying and persistent geopolitical and economic uncertainty.
Looking Ahead
Positive trade talks between the US and China in late October has lifted global sentiment. Both sides agreed to a one-year trade deal, pausing steeper US tariffs and limiting China’s export controls on rare earth minerals, a key input in the AI supply chain. The agreement helped sustain the seven-month rally in global equities into November. At the same time, US companies will continue to report Q3 earnings and shape market sentiment into year end.
October’s rally underscores the market’s confidence in AI-led growth and central bank support. Yet, with valuations elevated and political uncertainty persisting, particularly in the US, investors should remain vigilant. There remain concerns around the ongoing US government shutdown, stretched valuations and geopolitical risks, which could challenge market resilience in the months ahead. Diversification and a focus on quality remain key as markets navigate an increasingly complex macroeconomic landscape.
Global Indicators – Local reporting currencies
