• Government-bond yield curves flattened during the month; inflation-indexed sovereign debt was the top performer within fixed income, retaining its lead from the third quarter.
  • While U.S. inflation maybe 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 stocks surged, with the U.S. at the helm, while emerging-market stocks mounted a subdued advance. European and U.K. stocks 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 U.S., U.K. and eurozone 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-income markets in October, while local-currency emerging-market debt continued to sustain the 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 2014.

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 outbreaks.

On a country-level, the U.S. 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 U.K. 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 U.K. (74%) and U.S. (67%) populations had received at least one COVID-19 vaccine dose, while 38% of Russia’s residents had received the same.

The 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—centered 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.

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