Introduction

October 2023 was marked by a combination of geopolitical risk, rising yields, and mixed economic signals that pressured global markets. Investor sentiment turned increasingly defensive as the Israel-Hamas conflict sparked volatility across energy markets, and the U.S. Treasury yield curve steepened sharply. Central banks attempted to strike a delicate balance between inflation control and the growing signs of a global economic slowdown. Risk assets broadly declined while safe-haven demand picked up modestly.

United States

U.S. equities posted their third consecutive monthly decline. The S&P 500 dropped 2.2% and the Nasdaq Composite lost 2.8%, weighed down by surging bond yields and disappointing earnings from some major tech firms. The 10-year Treasury yield briefly breached 5.0% - a level not seen since 2007 - before retreating slightly into month-end.

The Federal Reserve kept rates on hold at its October meeting but maintained a hawkish bias, citing elevated inflation and tight labour markets. The September CPI report showed inflation holding at 3.7% year-on-year, while core inflation eased marginally to 4.1%. Economic growth remained resilient, with Q3 GDP coming in at a strong 4.9% annualised rate, complicating the Fed's path forward.

Europe

European equity markets also struggled, with the Euro Stoxx 50 falling 3.4%. Economic data in the eurozone continued to soften, with the composite PMI remaining below 50 for the fourth consecutive month. Germany, in particular, saw contracting industrial production and declining business sentiment.

The European Central Bank held interest rates steady for the first time since July 2022, signalling that its rapid tightening cycle may be nearing an end. Headline inflation in the euro area dropped to 2.9%, its lowest since mid-2021, though core inflation remained at 4.2%, keeping the ECB cautious.

Asia-Pacific

Asia-Pacific markets were mixed in October. Japan's Nikkei 225 declined 3.0% as rising U.S. yields pressured global equities and the yen weakened sharply. The Bank of Japan surprised markets by adjusting its yield curve control policy, raising the cap on 10-year JGB yields to 1.0%, in a slow pivot toward policy normalisation.

China's markets remained under pressure, though the Shanghai Composite rose 1.0% for the month, supported by improved Q3 GDP data, which came in at 4.9% year-on-year. However, concerns around the property sector persisted, despite incremental easing measures by the central government. Australia's ASX 200 fell 3.8%, mirroring global risk-off sentiment and weakness in mining and energy stocks.

Emerging Markets

Emerging markets declined in October, with the MSCI Emerging Markets Index down 3.6%. A stronger dollar and geopolitical risk weighed on risk appetite, while rising U.S. yields led to outflows from EM debt. Currency pressure was particularly pronounced in Asia and Africa.

India bucked the trend, with the Nifty 50 up 0.8% as strong corporate earnings and sustained retail inflows supported equities. In contrast, Latin American markets declined, and South Africa's rand came under renewed pressure as fiscal concerns resurfaced ahead of its medium-term budget statement.

Commodities

Oil prices spiked early in the month amid fears of supply disruption following the outbreak of conflict in the Middle East. Brent crude rose briefly above USD 92/barrel before retreating to USD 87 by month-end as broader demand concerns and diplomatic containment efforts prevailed.

Gold rallied strongly, climbing above USD 2,000/oz at one point, before closing at USD 1,985/oz, reflecting increased geopolitical hedging and a pullback in real yields. Industrial metals traded sideways, with copper prices steady amid offsetting signals from China and global construction demand.

Fixed Income & Currencies

Bond markets remained volatile. The U.S. 10-year Treasury yield surged to a high of 5.02% before easing to 4.84% as concerns over economic overheating and supply dynamics subsided slightly. The steepening of the yield curve accelerated, while corporate bond spreads widened modestly across investment-grade and high-yield segments.

The U.S. dollar gained ground against most major currencies during the month. The yen weakened to a 33-year low near 151 per dollar, prompting verbal intervention from Japanese officials. The euro and pound both softened, while the Singapore dollar held firm on the back of MAS's decision to maintain its policy stance in October.

Outlook

October reinforced the message that monetary policy, geopolitics, and fiscal dynamics are now deeply intertwined in shaping market outcomes. The global economy remains at an inflection point, with inflation easing but policy rates remaining restrictive and financial conditions tightening. Investors are now looking toward year-end with caution, watching for signals of central bank pauses, fiscal risks, and geopolitical escalations.

Brightness Capital & Asset Advisory remains positioned defensively, with a bias toward quality assets, shorter duration fixed income, and selective equity exposure in resilient sectors. We continue to monitor volatility as a potential source of opportunity in an increasingly complex macro environment.