Global equity markets were firmly on the back foot last week as rising government bond yields and Middle Eastern geopolitical fears weighed heavily on investor sentiment. The closely monitored US 10-year treasury yield briefly flirted with the 5.0% mark before ultimately concluding the week 29 basis points (bps) higher at 4.91%. That was still close to its highest level for 16 years, in part reflecting a slightly more hawkish tone from the Federal Reserve (Fed). The S&P 500 and NASDAQ indices declined by -2.4% and -3.2% respectively with growth stocks underperforming their value orientated peers.

European equity markets also went sharply into reverse, the MSCI Europe ex UK index slumping by -3.5% whilst the FTSE 100 fell by -2.6%. Inflation data in the UK was an added headwind for the domestic market last week as the 6.7% headline CPI figure exceeded expectations. The data maintained pressure on the Bank of England in its battle to tame inflation, especially given that oil prices continued to grind higher. Brent Crude added +1.4% to $92.23 a barrel, taking its 3-month gain to nearly +16.0% as concerns that the ongoing war in Israel and Gaza could turn into a broader Middle East conflict.

Elsewhere, Chinese equities remained on the backfoot with the significant issues in its embattled property sector worsening. The Shanghai Composite declined by -3.4% in part reflecting the news that Country Garden, once the largest developer in country, had failed to meet payments on some of its offshore debt. The slump in the market came despite strong economic growth data which revealed that Q3’23 GDP handily beat economist expectations. Meanwhile in Japan, the Nikkei 225 fell by -3.3% as investors contended with higher government bond yields both in the US and domestically. The Japanese 10-year added 7bps over the course the week to 0.81%, close to its highest level for a decade.

Week Ahead

Source: Refinitiv Workspace, 23/10/23

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