Financial markets experienced several impulses in October. From a human perspective, the Israel-Hamas war is the most far-reaching. Less far-reaching, however, were the outcomes we could observe in the financial markets. The price of oil fell even compared to September. Gold and gas prices were considerably higher than last month. Equities lost some ground under pressure from this new source of geopolitical turmoil. In Europe, interest rates fell slightly (especially short-term rates), while in the U.S. they rose slightly (due to strong economic data).
Shares
October was the third consecutive month of negative returns for equities. The MSCI All Countries World Index (measured in euros) lost 2.8%. Developed markets (-2.7%) fared relatively better than emerging markets (-3.7%). Better-than-expected economic data caused North America (-2.3%) to fare best among developed markets. Europe (-3.6%), Pacific excluding Japan, and Japan (both -4.3%) followed at an appropriate distance. Among emerging markets, EMEA (-2.7%) was by far the best performing region. Asia (-3.8%), China (-4.1%) and Latin America (-4.6%) were close behind. At the sector level, we saw that utilities performed relatively well and companies in the manufacturing and energy sectors lagged relatively behind.
Bonds
As indicated above, economic developments in interest rates were the reason for the differences between Europe and the US. In October, US 10-year interest rates rose further to 4.93% (+0.36%). German 10-year rates, however, fell 0.03% to 2.81%, as did the Netherlands (to 3.15%). Bond risk premiums rose somewhat across the board in October. For emerging market government bonds (4.31%) and less risky corporate bonds (1.59%), the increases were still relatively limited at 0.06% and 0.08%, respectively. More risky corporate bonds (4.76%) had a less good month with an increase of 0.38%.