By Bas Kooijman is the CEO and Asset Manager of DHF Capital S.A
Global Markets Weekly Summary
United States: Sentiment Weakens Amid Tech Sell-Off
U.S. equity markets lost ground last week, breaking a three-week winning streak. Technology and growth-focused stocks led the declines as investors reassessed high valuations and questioned the pace of spending in artificial intelligence (AI). The Nasdaq Composite posted the largest drop among major indexes, while growth shares underperformed value stocks by nearly three percentage points, the widest gap since February.
Adding pressure, the ongoing U.S. federal government shutdown, the longest on record began to affect confidence. Reports of flight reductions ordered by the Federal Aviation Administration due to staffing shortages, and concerns about delayed government data releases, weighed on investor sentiment and economic expectations.
Employment data offered mixed signals. The ADP private payroll report showed 42,000 new jobs in October, ending two months of declines, though most gains were limited to a few sectors. Meanwhile, Challenger, Gray & Christmas reported that employers have announced over 1.1 million job cuts so far this year up 65% from the same period in 2024 making October’s layoffs the highest for that month in two decades.
On the activity side, the services sector showed renewed growth with the ISM Services Index rising to 52.4, but manufacturing continued to contract for an eighth month, reflecting uneven momentum across the economy. Consumer sentiment deteriorated sharply, with the University of Michigan’s index dropping to its lowest level since mid-2022 as households cited financial strain and government uncertainty. Inflation expectations inched up slightly to 4.7%, highlighting ongoing cost-of-living concerns.
In fixed income, U.S. Treasuries posted modest gains, with yields mixed along the curve. High-yield bonds, however, lagged as risk appetite faded in line with equity weakness. The Dow Jones Industrial Average ended the week down 1.2%, the S&P 500 lost 1.6%, and the Nasdaq Composite fell over 3%.
Europe: Central Banks Hold Steady as Growth Concerns Persist
European equities retreated, with the STOXX Europe 600 Index falling 1.24%. Technology shares mirrored global weakness as investors trimmed exposure to AI-linked sectors. Major country indexes also declined: Germany’s DAX dropped 1.62%, France’s CAC 40 lost 2.10%, and Italy’s FTSE MIB slipped 0.60%.
Central bank decisions were a key focus. The Bank of England kept its main policy rate at 4.0%, with officials hinting that rate cuts could follow in December if inflation continues to ease. Governor Andrew Bailey signaled that market pricing, which anticipates rates around 3.5% within three years, aligns with his outlook.
Elsewhere, Sweden’s Riksbank and Norway’s Norges Bank both left interest rates unchanged at 1.75% and 4.0% respectively citing persistent inflation pressures and cautious economic outlooks.
Across the euro area, consumer spending and industrial data highlighted a sluggish recovery. Retail sales declined for the third straight month in September, while German industrial output rose modestly by 1.3% below expectations indicating that Europe’s largest economy remains under strain. Despite small improvements in manufacturing orders, officials in Berlin described the industrial trend as “weak.”
Overall, the European outlook remains characterized by fragile demand, slowing consumer activity, and tight financial conditions. However, expectations for monetary easing in the months ahead could support sentiment as inflation gradually stabilizes across the region.
Asia: Japan Pulls Back, China Strengthens on Trade Truce
Asian markets delivered mixed results. In Japan, both the Nikkei 225 and TOPIX indexes fell after reaching record highs in late October. Investors took profits in AI-linked and semiconductor stocks, wary that valuations had risen too far, too fast. The yen strengthened slightly to around JPY 153 per U.S. dollar as risk-off sentiment boosted demand for safe-haven assets.
Government officials, including Finance Minister Satsuki Katayama, reiterated their vigilance over currency movements, while the Bank of Japan signaled readiness to tighten policy further if wage growth becomes sustainable. Nominal wages rose 1.9% year-on-year in September, but real wages continued to decline, underscoring ongoing inflation pressures. Prime Minister Sanae Takaichi confirmed that a fiscal stimulus package aimed at supporting household income and boosting consumption would be unveiled this month.
In contrast, Chinese equities advanced modestly as trade relations with the U.S. appeared to improve. The CSI 300 Index gained 0.82%, and Hong Kong’s Hang Seng Index rose 1.29%. Markets welcomed news of a one-year truce in the U.S. – China trade dispute following meetings at the APEC summit in South Korea. While concrete outcomes were limited, the tone signaled a more pragmatic approach to economic cooperation, helping to lift regional confidence.
Overall, Asian markets reflected diverging trends in profit-taking in Japan amid policy uncertainty and a cautious rebound in China supported by diplomatic progress and improved investor sentiment.
Looking Ahead –
Global markets ended the week mixed, as investors weighed signs of economic resilience against persistent inflation pressures and uncertainty around the trajectory of interest rates and government policy. As investors navigate shifting economic signals, attention now turns to upcoming inflation data and central bank guidance, which will shape market sentiment heading into the final months of the year.