Fed rate cut and strong corporate results support global rally

Global equities extended gains in October, with the MSCI World Index up 2.0% (USD) amid monetary easing, strong corporate earnings, and sustained AI optimism. The US Federal Reserve cut rates by 25 bps to 3.75-4.00%, boosting sentiment as over 80% of S&P 500 companies beat earnings expectations. Europe advanced on easing inflation and stable ECB policy, while Japan’s Nikkei 225 jumped 16.7% (in JPY), its best monthly gain in 35 years. China was mixed, with modest gains in the CSI 300 offset by MSCI China weakness. Emerging markets outperformed developed markets, led by semiconductor stocks in Korea and Taiwan. Gold and copper rose, while oil fell to $64.77/bbl. Rand −0.5% to R17.33/USD. 

Highlights in the article reveal:

• Global equities advanced for a seventh straight month, supported by monetary easing, strong corporate earnings, and AI-driven optimism. 
• The US Federal Reserve cut rates by 25bps to 3.75–4.00%, reinforcing market sentiment and supporting risk assets. 
• Tech and semiconductor stocks led global gains, especially in the US, Japan, Korea, and Taiwan. 
• Europe gained modestly, while Chinese equities were mixed amid tentative US-China trade progress. 

Global equity markets extended their rally in October, supported by a combination of monetary easing, robust corporate earnings, and continued enthusiasm around artificial intelligence (AI). The MSCI World Index rose 2.0% (in USD), marking its seventh consecutive monthly gain. Investor sentiment was buoyed by the US Federal Reserve’s decision to cut rates by 25 basis points, bringing the target range to 3.75-4.00%, alongside signs of easing trade tensions between the US and China. 

In the United States, the S&P 500 gained 2.3% (in USD), the Dow Jones Industrial Average rose 2.6%, while the Nasdaq Composite led with a 4.7% increase.  

More than 60% of S&P 500 companies reported earnings during the month, with 82% exceeding earnings expectations. 

Alphabet and Microsoft delivered strong growth in cloud services, while Meta fell 12% amid continued losses in its Reality Labs division. US Inflation surprised to the downside, with headline CPI rising to 3.0% for the month, up from 2.9% in August, while Core CPI (excluding food and energy), slowed to 3.0% year-on-year, from 3.1% in August. Disinflation in services and rental costs supported the Fed’s decision to ease monetary policy, although markets have tempered expectations for additional rate cuts.  

European markets posted moderate gains, with the STOXX All Europe Index up 2.5% (in EUR), driven by autos and luxury goods benefiting from signs of recovering Chinese demand which helped offset weakness in industrial exporters.  

The broader eurozone composite PMI reached 50.4, signalling marginal expansion, while headline inflation declined to 2.1%, its lowest level since mid-2022. 

The European Central Bank held interest rates steady for the third consecutive meeting, expressing confidence in the inflation outlook and resilience in services activity. In the UK, the FTSE 100 rose 4.1% (in GBP), supported by falling gilt yields and strength in commodities. UK Inflation remained elevated, with the annual headline rate at 3.8% year-on-year in September, unchanged from August. This was underpinned by wage growth and higher import costs linked to ongoing trade frictions. 

Japan’s Nikkei 225 surged 16.7% (in JPY), recording its strongest monthly performance in 35 years. The rally was supported by stable domestic policy, strong corporate earnings, and favourable global conditions. The Bank of Japan (BoJ) maintained its benchmark short-term interest rate at 0.5%, keeping borrowing costs at their highest level since 2008.  

The yen remained relatively stable despite global currency volatility, supporting export-oriented firms.

Chinese equities were mixed. The CSI 300 rose 0.2% (in CNY), while the MSCI China Index declined 3.8% (in USD). Market sentiment was shaped by late-month trade discussions between the US and China, which resulted in a tentative one-year agreement to pause the implementation of steeper US tariffs and limiting China’s export restrictions on rare earth minerals, which are key inputs for AI and semiconductor manufacturing. Although no formal deal was signed, the more constructive tone marked a shift from earlier tensions that had triggered sharp equity declines. The People’s Bank of China (PBoC) kept its one-year Loan Prime Rate at 3.0% and five-year rate at 3.5% for a fifth consecutive month, maintaining a stable policy stance.  

Emerging markets outperformed developed peers, with the MSCI EM Index up 4.2% (in USD) for the month and 33% year-to-date.

The rally was led by strong gains in Asian technology stocks, particularly semiconductor producers in Korea and Taiwan. SK Hynix surged 58%, Samsung Electronics rose 26%, and TSMC advanced 14%, collectively contributing 3% to the MSCI EM Index. The sector’s performance was bolstered by improving trade relations between the US and China.  

Commodities delivered mixed returns. Gold rose 3.7% to $4,002.92/oz, silver gained 4.4% to $48.69/oz, and copper increased 6.3% to $10,873.06/tonne. Oil fell 1.9% to $64.77/bbl, its third consecutive monthly decline, while platinum eased 0.1% and palladium rose 14.1%. 

The rand remained broadly stable against a strong US dollar, closing at R17.33/USD. 

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