Introduction

October 2024 was dominated by surging geopolitical tensions, rising bond yields, and a sharp shift in investor sentiment. Risk assets sold off globally as concerns mounted over the widening Middle East conflict, elevated inflation expectations, and central bank hesitation to initiate rate cuts. Defensive positioning and dollar strength defined the month, while energy and precious metals outperformed other asset classes.

United States

U.S. markets ended sharply lower. The S&P 500 fell 4.9% and the Nasdaq Composite declined 5.6% - marking the worst month for both indices in 2024. Volatility spiked as investors reacted to hawkish Federal Reserve rhetoric and rising geopolitical risk premiums.

The September CPI showed headline inflation ticking up to 3.8%, while core inflation remained sticky at 3.4%. Fed officials reiterated that it was "too soon to ease," and signalled a higher-for-longer bias. The 10-year Treasury yield climbed to 4.71%, its highest level since 2007, further pressuring rate-sensitive equities.

Europe

European equities fell for a third straight month. The Euro Stoxx 50 lost 3.1%, with weakness in financials, travel, and industrials. Economic data across the eurozone remained soft, with manufacturing activity contracting and consumer sentiment deteriorating. Political uncertainty in France and Spain also weighed on regional indices.

The European Central Bank left rates on hold and warned that market expectations for imminent cuts were premature. Eurozone inflation declined modestly to 2.4%, but policymakers stressed the need for sustained disinflation before adjusting policy. German bund yields rose in line with U.S. Treasuries, tightening financial conditions across the continent.

Asia-Pacific

Asian markets faced divergent trends. Japan's Nikkei 225 declined 2.5%, as global uncertainty, yen depreciation, and energy price concerns weighed on sentiment. The Bank of Japan intervened in currency markets after the yen breached the 160/USD level, seeking to stem speculative flows without raising rates.

China's equity markets stabilised. The Hang Seng Index rose 1.2%, and the Shanghai Composite gained 0.8%, supported by state-backed buying and modest fiscal stimulus. Recent property sector support measures were positively received, though longer-term concerns lingered. Australia's ASX 200 slipped 1.3%, dragged down by financials and energy importers.

Emerging Markets

Emerging markets underperformed developed peers. The MSCI Emerging Markets Index fell 3.5% in October, with capital outflows accelerating amid rising U.S. yields and global risk aversion. Currency weakness across Latin America and Eastern Europe contributed to volatility.

India's Nifty 50 declined 2.1%, pressured by rising oil import costs and weakening rural demand. Brazil's Bovespa dropped 4.4% as inflation fears returned and fiscal discipline came under scrutiny. South Africa and Turkey also posted losses, while Indonesia and Vietnam remained more resilient due to stronger balance of payments and FX reserves.

Commodities

Oil prices spiked early in the month amid Middle East conflict escalation. Brent crude briefly touched USD 98/barrel before settling near USD 94, supported by fears of supply disruption and rising strategic stockpiling. Energy equities outperformed across most regions.

Gold surged to USD 2,485/oz, driven by geopolitical hedging, falling real yields, and central bank buying. Copper declined 2.0% amid weaker global industrial activity, though long-term supply constraints remained a bullish theme among institutional investors.

Fixed Income & Currencies

Bond markets saw significant volatility. The U.S. 10-year Treasury yield closed the month at 4.71%, having breached 4.8% intramonth. Credit spreads widened slightly, and primary issuance slowed. European and UK yields also rose, tightening conditions across global funding markets.

The U.S. dollar strengthened further. The yen was volatile following intervention. The euro weakened modestly, and EM currencies broadly depreciated, particularly in oil-importing economies. The Singapore dollar remained stable, benefiting from MAS currency management and persistent trade surpluses.

Outlook

October marked a turning point in sentiment, as the “higher-for-longer” narrative returned and geopolitical risk became a more dominant market force. With central banks wary of easing and inflation still above target, volatility is expected to persist into year-end. Earnings season, energy prices, and fiscal signals will drive near-term positioning.

Brightness Capital & Asset Advisory maintains a defensive bias with elevated cash allocations, quality equity exposure, and a preference for short-duration credit. We continue to monitor macro crosscurrents closely, while identifying opportunities in real assets, selected emerging markets, and sectors with pricing power in a higher-rate environment.