MONTHLY MARKET UPDATE

4 November, 2025

Author: Jesmar Halliday, CFA

Global equity markets registered a broad advance through October as investor sentiment turned markedly more optimistic. The easing of inflationary pressures, coupled with resilient corporate earnings and speculation that interest rate cuts could emerge in 2026, helped restore confidence in risk assets following a turbulent third quarter. A softer policy outlook from central banks reinforced market conviction that the tightening cycle is drawing to a close, prompting a renewed appetite for equities across most developed regions. Japan dominated the global equity landscape, comfortably outperforming its peers with a rally exceeding 16 per cent for the month. The surge in the Nikkei 225 was driven by a combination of persistent yen weakness, continued corporate reform momentum, and unwavering policy support from the Bank of Japan. Technology-oriented markets were another strong contributor to the global upturn. Robust quarterly earnings from large-cap technology names and revived enthusiasm for artificial intelligence themes pushed the NASDAQ Composite and S&P 500 higher with a return of 4.7 per cent and 2.3 per cent respectively. Broader US indices such as the Russell 1000 and Russell 3000 also posted gains slightly above 2 per cent, signalling healthy participation across the market spectrum.

In Europe, equity markets delivered steady progress, supported by lower energy prices and improved investor confidence. The Euro Stoxx 50 and MSCI Europe Large Cap indices each rose about 2.5 per cent, while southern European markets stood out with Spain’s IBEX 35 and France’s CAC 40 climbed between 3 per cent and 4 per cent, underpinned by strong corporate earnings and resilient domestic activity. UK equities benefited from the global risk-on tone, with the FTSE 100 advancing close to 4 per cent and mid-cap names in the FTSE 250 posting smaller but positive returns. The UK market’s concentration in energy, mining, and defensive sectors, along with a stable sterling, contributed to its relative strength. Performance across emerging markets was mixed. India and Taiwan both delivered strong returns of 4.6 per cent and 9.3 per cent respectively reflecting solid domestic growth and strength in exported technology industries. Chinese equities, however, were largely unchanged, as continuedweakness in the property sector and uneven policy execution limited investor enthusiasm. Elsewhere, markets in Central and Eastern Europe notably Hungary, Romania, and Portugal all registered notable gains between 5 per cent and 8 per cent, supported by moderating inflation and stable local currencies. Smaller-capitalisation indices in the US and Europe also rose modestly between 1 and 2 per cent, as cyclical optimism improved, although smaller firms continued to trail their large-cap counterparts amid lingering cost pressures and uncertain earnings visibility.

Fixed income markets strengthened in October, recovering from earlier weakness as global yields stabilised. The improvement reflected a growing sense that the major central banks were nearing the end of their tightening cycles, supported by a series of softer inflation readings. This environment fostered a more constructive tone in bond markets and encouraged renewed inflows across both sovereign and credit segments. Government bonds posted moderate but broad-based gains, particularly at the longer end of the maturity curve. US Treasuries advanced between 0.4 per cent and 1.3 per cent across the curve, while euro-area bonds delivered returns ranging from 0.3 per cent to 1.8 per cent as inflation momentum eased. UK gilts outperformed their global peers with returns of 0.9–5.4 per cent (15+ Gilts returning 5.4 per cent for the month of October), buoyed by expectations of earlier rate cuts and a sharp fall in long-term yields. Emerging market debt continued its positive run, with investment-grade and high-yield bonds climbing between 0.9 per cent and 3 per cent. Investor appetite for carry opportunities remained firm amid stable exchange rates and improving local fundamentals. Local-currency bonds in India and China also posted small but positive returns as yields edged lower, reflecting ongoing policy support and contained inflation pressures.

In corporate credit, investment-grade bonds rose by roughly 1 to 2 per cent in line with the sovereign rally. Spreads tightened marginally, supported by better risk sentiment and stable earnings in core cyclical sectors such as financials and industrials. The high-yield space, however, showed distinct regional differences. US and global high-yield indices delivered modest gains, while European high yield was subdued. The lowest-rated segment, particularly CCC-rated bonds, fell sharply by more than 4 per cent on renewed concerns about credit quality, whereas BB-rated issues posted mild advances. Longer-dated securities outperformed across most developed markets as duration exposure proved advantageous in a flattening yield curve environment. Investors appeared increasingly positioned for a potential transition to looser monetary policy in 2026. Overall, October was constructive for fixed income, marked by stabilising yields, an improvement in sentiment, and positive returns across sovereign, corporate, and emerging market segments.

The European Central Bank entered October with a cautious and data-dependent stance. While inflation in the euro area remained contained, signs of stabilisation rather than acceleration in economic activity prompted the ECB to maintain its policy rates unchanged for a third consecutive meeting. Policymakers emphasised that monetary settings were appropriate for current conditions, reiterating that future actions would hinge on forthcoming economic data rather than predetermined targets. This neutral tone left investors debating whether the Bank had completed its rate adjustments or was simply pausing to assess policy transmission.

the United States, the Federal Reserve took a more nuanced approach. It implemented a modest rate cut during the month but delivered a clear message that further near-term easing was not guaranteed. Chair Jerome Powell stressed that while growth remained resilient, inflation persistence warranted caution. His remarks curbed market expectations for aggressive rate reductions, nudging Treasury yields higher and lending renewed strength to the US dollar. In Japan, the Bank of Japan continued to hold its ultra-loose stance, though internal divisions within the board became more visible. A minority of policymakers advocated for a rate hike, citing firmer wage growth and improving domestic demand. While the governor maintained that inflation and wage dynamics must show sustained improvement before tightening, markets interpreted this dissent as a sign that gradual policy normalisation is inching closer.

Geopolitical developments further underscored the evolving nature of globalisation. Nations are increasingly structuring supply chains, trade partnerships, and payment systems around strategic trust rather than cost efficiency, creating new regional alliances. This shift towards security-led economic integration is reshaping trade routes and investment priorities, signalling a move away from the broad globalisation of previous decades. Within Europe, political uncertainty continued to influence both economic sentiment and fiscal policy debates. Governments faced mounting pressure to balance spending discipline with the demands of competitiveness and energy transition, creating tensions that occasionally weighed on investor confidence.

Important Information:

This article was prepared by Jesmar Halliday, CFA, Portfolio Manager at MZ Investments and is intended solely for information purposes. The contents of this article should not be construed as investment, legal or tax advice, or as a recommendation to buy, sell, or hold any securities, investment strategy or market sector. The information contained in this article was obtained from sources believed to be reliable and has not been verified independently. MZ Investments, its directors and employees give no warranties of any kind, expressed or implied, with regard to the accuracy, correctness or completeness of this article and accepts no responsibility or liability for any loss or damages arising out of the use of all or any part of this article. MZ Investments is under no obligation to update or keep current the information contained therein. All investments involve risk. The value of investments may go down as well as up and investors may not get back the amount originally invested. Investors are urged to seek professional advice before making investment decisions.

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