• Government-bond yield curves flattened during the month; inflation-indexed sovereign debt was the top performer within fixed interest, retaining its lead from the third quarter.
  • While US inflation may be near a peak, Europe appears poised for further acceleration given immediate concerns about the cost of energy.

Equities charged ahead around most of the world in October, erasing September’s dip. Developed-market shares surged, with the US at the helm, while emerging-market shares mounted a subdued advance. European and UK shares delivered strong performance in October, while Japan continued its countertrend pattern with a plunge that offset its sizeable September gain.

Outside of developed markets, Argentina and Indonesia sustained remarkable multi-month runs, and China offset recent drops with a healthy showing in October. Peru outpaced nearly all other markets (second only to Egypt), but Latin America’s overall equity-market performance sank as Brazil and Chile clocked the worst emerging-market country-level performance.

Government-bond yield curves flattened in the UK, eurozone and US during October as short-to-medium-term rates climbed and longer-term rates declined. Inflation-indexed sovereign debt retained its third-quarter rank as the top-performing segment of fixed-interest markets in October, while local-currency emerging-market debt continued to sustain deepest losses.

The price of West Texas Intermediate crude oil increased by 11.4% to end October at $83.57 per barrel, its highest level since October 20141.

The number of new COVID-19 cases reported globally appeared to bottom in mid-October after hitting a recent peak in mid-August (as measured by the seven-day average, according to Reuters’ global tracker). By the month’s end, Eastern Europe (and, to a lesser degree, the Caribbean and Southeast Asia) had the highest concentrations of countries contending with all-time peak or near-peak outbreaks2.

On a country-level, the US continued to report the highest average number of new infections and COVID-19-related deaths per day at the end of October; yet its infection rate declined to 29% of its all-time high. The UK averaged the second-largest number of daily infections and recorded a rising infection trajectory for most of October, but it registered a much lower death rate compared to other countries. Russia had the third-highest average number of new infections per day in late October (hitting its all-time peak at the end of the month) and averaged the second-highest daily number of COVD-19-related deaths. By the end of the month, large majorities of the UK (74%) and US (67%) populations had received at least one COVID-19 vaccine dose, while 38% of Russia’s residents had received the same3.

The US Congress voted to increase the federal debt ceiling by $480 billion in mid-October, effectively allowing federal borrowing until early December in order to temporarily prevent a government shutdown. Competing priorities—centred on funding for a large multi-year infrastructure plan and a wide-ranging healthcare, education and child care program—have fragmented the Democrats’ razor-thin majority; although there appears to be enough votes to enact the infrastructure priorities.

In early October, US Trade Representative Katherine Tai formally articulated the US-China trade policy of President Joe Biden’s administration, which includes retaining existing tariffs, avoiding new ones, and committing to the Phase One trade deal. She also announced the reinstatement of an exclusion process for US companies that apply for relief from tariff-induced damages.

Beleaguered Chinese property developer Evergrande made two interest payments in October as 30-day grace periods were set to expire, narrowly averting defaults. Fantasia Holdings Group, a much smaller developer, failed to repay a $206 million bond payment early in the month.

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1 According to market data from The Wall Street Journal
2 “COVID-19 Global Tracker.” Reuters.
3 “COVID-19 Vaccination Tracker.” Reuters.

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