October 2015

• Global markets rebounded strongly in October 2015 as expectations for additional monetary stimulus in Europe and China restored investor confidence after the turbulence of the previous two months.
• The European Central Bank signalled that it was prepared to expand its quantitative easing programme, while the People's Bank of China delivered further interest rate cuts.
• U.S. equities recorded one of their strongest monthly advances in several years as corporate earnings proved more resilient than feared.
• Japan and Europe posted robust gains, supported by accommodative central bank policies and improving investor sentiment.
• Emerging markets benefited from a softer U.S. dollar and recovering risk appetite.
• Commodity prices stabilised, with oil and industrial metals recovering modestly from depressed levels.

Asia (ex. Japan)

Asian markets outside Japan advanced during October as policymakers across the region adopted increasingly supportive measures. China's central bank cut benchmark interest rates and reserve requirements again, reinforcing the government's commitment to stabilising growth and supporting financial conditions. Chinese equities recovered as concerns over the summer market correction began to fade.

India continued to perform well as inflation moderated and monetary policy remained accommodative. South Korea, Taiwan and several Southeast Asian markets also benefited from improved global sentiment and a softer U.S. dollar, which reduced pressure on regional currencies and capital flows.

Europe

European equities rallied strongly in October after the European Central Bank indicated that it was prepared to review and potentially expand its asset purchase programme in December. This dovish shift weakened the euro and improved expectations for economic growth and corporate earnings.

Economic data remained mixed but generally pointed to continued expansion across the eurozone. Low borrowing costs, improving credit conditions and supportive monetary policy sustained investor confidence, while sovereign bond yields declined as markets priced in further easing.

United States

U.S. equities rebounded sharply in October, with the S&P 500 posting its strongest monthly gain since 2011. Investors were encouraged by corporate earnings that exceeded reduced expectations and by continued evidence of solid consumer spending and employment growth.

At the same time, the Federal Reserve surprised some market participants by indicating that a December interest rate increase remained possible. Despite this, equity markets focused on improving sentiment and reduced concerns about global growth. Treasury yields rose modestly as expectations for policy tightening increased.

United Kingdom

UK equities posted strong gains in October as improving global risk appetite and expectations of continued accommodative monetary policy supported sentiment. Domestic economic conditions remained stable, with low inflation, rising wages and healthy consumer spending.

The Bank of England maintained interest rates unchanged and signalled that inflationary pressures remained subdued. Sterling was relatively stable, while gilt yields moved modestly lower as global investors continued to seek income in a low-yield environment.

Japan

Japanese equities advanced in October as investors anticipated the possibility of additional Bank of Japan stimulus and continued to benefit from strong corporate earnings. Governance reforms and increased shareholder returns remained important supportive themes.

Although the Bank of Japan ultimately left policy unchanged during the month, the prospect of future easing and steady domestic institutional demand helped maintain positive momentum. Exporters also benefited from a relatively competitive yen.

Emerging Markets

Emerging markets performed well in October as the U.S. dollar softened and global risk appetite improved. Lower expectations for immediate U.S. interest rate increases early in the month and supportive Chinese policy measures contributed to renewed capital inflows.

Commodity-exporting countries saw some relief as prices stabilised, while reform-oriented economies such as India continued to attract investor interest. Currency volatility subsided, allowing both equity and fixed income markets to recover from earlier weakness.

Commodities

Commodity prices stabilised during October after several months of declines. Crude oil recovered modestly as lower U.S. production and improving market sentiment offset continued concerns over abundant global supply.

Industrial metals also rebounded, supported by Chinese stimulus measures and improved investor confidence. Gold prices were little changed, balancing stronger risk appetite against ongoing uncertainty regarding the timing of U.S. monetary tightening.