The stock markets were friendly in October, with the notable exceptions of the DAX and Hang Seng Index (Hong Kong), which performed negatively. In the US, solid corporate earnings, particularly in the technology and healthcare sectors, supported share prices. The global economy was stable in October, albeit still below long-term potential growth.
The fact that the trade disputes and tariff threats between the US and China that arose at the beginning of the month were resolved by the middle of the month had a positive effect. The Japanese stock market even experienced its best month since October 1990, triggered by the election of Sanae Takaichi as Prime Minister and her plans to stimulate the economy with fiscal incentives.
On the other hand, fraud cases at two US regional banks weighed on the banking sector, and there were concerns about a possible speculative bubble in light of the AI boom, as the rally is being led primarily by a small group of tech stocks, the so-called "Magnificent 7".
In the eurozone, overall inflation fell to 2.1%, while core inflation remained at 2.4%. The easing in energy and industrial goods was particularly noticeable, while services continued to make an above-average contribution to inflation. In the USA, the latest available inflation rate (September) was 3.0%. The publication of the October data was delayed due to administrative restrictions. The European Central Bank (ECB) left its key interest rates unchanged, with a deposit rate of 2.00%. The ECB considers the transmission of monetary policy to be largely complete.
The US Federal Reserve (Fed), on the other hand, lowered its key interest rate by 25 basis points to a range of 3.75% to 4.00%, as expected, citing the increasing weakness on the labor market. However, the Fed also signaled that a further reduction in key interest rates, which the majority of market participants expected, was not guaranteed. This led to a rise in yields and a strengthening of the US dollar: The greenback rose against the euro and closed at 1.153.
On the bond markets for government bonds in the USA and the eurozone, yields developed uniformly in a monthly comparison. Yields on 10-year US government bonds fell by 7 basis points and closed at 4.08%. Yields on 10-year German government bonds fell by 8 basis points from 2.71% to 2.63%. The yield on 10-year Italian government bonds even fell by 15 basis points to 3.38%.
Investment grade (IG) corporate bonds showed different trends. The yield on euro IG bonds fell to 3.01%, while yields on their US counterparts closed 1 basis point higher at 4.82%. In the high-yield segment, on the other hand, yield movements were uniform. They rose by 8 basis points to 6.77% for US dollar corporate bonds and by 6 basis points to 5.35% for euro-denominated bonds. The price of gold continued to rise over the course of the month, climbing to over USD 4,300 per troy ounce and closing the month at USD 4,002.
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