By Bas Kooijman, CEO and Asset Manager of DHF Capital S.A
U.S. Market: Inflation Eases, Stocks Gain Ground
U.S. markets closed the week higher, overcoming volatility from renewed U.S.-China trade tensions and rising oil prices following new U.S. sanctions on Russia’s two largest oil firms. The small-cap Russell 2000 and mid-cap S&P 400 indexes outperformed major benchmarks, while within the S&P 500, technology and energy stocks led the gains. Defensive sectors such as utilities and consumer staples underperformed.
Economic data released during the week painted a mixed but generally encouraging picture. Inflation came in slightly below expectations, offering relief to investors concerned about persistent price pressures. The latest consumer price data showed headline inflation rising to 3.0% year-over-year in September slightly up from August’s 2.9%, but below economists’ estimates of 3.1%. Core inflation, which excludes volatile food and energy prices, eased to 3.0%.
Business activity continued to expand, according to early October purchasing managers’ index (PMI) readings from S&P Global. The composite PMI climbed to 54.8 from 53.9 in September, marking the 33rd straight month of expansion. Services remained the primary growth driver, reaching a three-month high, while manufacturing showed modest improvement. Still, business optimism declined amid ongoing policy uncertainty and trade concerns.
In the bond market, U.S. Treasury yields moved unevenly. Short-term yields rose while the 10-year Treasury yield slipped, reflecting uncertainty over monetary policy as the government shutdown delayed key data releases. Municipal bonds performed strongly thanks to steady demand and limited new issuance. Overall, investors viewed the week’s developments as a sign of gradual economic resilience and moderating inflation—a combination supportive of equities.
Europe: Inflation Holds Steady, Growth Surprises to the Upside
European equities ended the week broadly higher, driven by stronger-than-expected retail activity and improving business sentiment across the eurozone. The pan-European STOXX 600 gained 1.68%, with the UK’s FTSE 100 climbing over 3%, Germany’s DAX up 1.72%, and France’s CAC 40 posting a modest 0.63% increase.
In the UK, inflation remained unchanged for the third straight month at 3.8%, defying expectations of a small uptick. Core inflation eased slightly to 3.5%, reinforcing investor expectations that the Bank of England could begin cutting interest rates as early as December. Meanwhile, retail sales surprised to the upside, rising 0.5% in September
contrary to forecasts of a decline. Growth was supported by strong online and technology-related retail activity, including jewelry and telecommunications.
Across the eurozone, economic activity accelerated to its highest level since May 2024. The composite PMI rose to 52.2, beating expectations and marking the region’s continued recovery. The services sector remained particularly strong, while manufacturing edged back toward expansion for the first time in several months. Germany led the improvement, though France continued to struggle with contracting output.
Consumer confidence across the euro area also improved for a second consecutive month, reaching an eight-month high. This uptick reflects cautious optimism among households as inflation pressures ease and energy prices stabilize. Taken together, the data suggest that Europe’s economy is slowly regaining momentum after a prolonged period of subdued growth.
Asia: Japan’s New Leadership Sparks Optimism, China Faces Mixed Outlook
In Asia, markets were broadly positive, with Japan and China leading the rally. Japan’s Nikkei 225 surged 3.61%, while the broader TOPIX gained 3.12%, as investors welcomed the appointment of Sanae Takaichi as Japan’s new prime minister. Her pro-growth agenda and expected fiscal stimulus boosted investor confidence. The yen weakened to around 152.9 per dollar amid speculation that a large-scale stimulus package could be announced soon. Japanese government bond yields rose slightly, while inflation remained steady at 2.9% still above the Bank of Japan’s 2% target.
China’s markets also saw strong gains, with the CSI 300 rising 3.24% and Hong Kong’s Hang Seng advancing 3.62%. Economic data painted a mixed picture: while GDP growth of 4.8% in the third quarter keeps China on track to meet its 5% annual target, domestic demand remains weak. Retail sales grew only 3% year-over-year, and fixed asset investment unexpectedly declined. However, industrial output exceeded expectations with a 6.5% increase, driven by robust exports.
Beijing emphasized plans to boost self-reliance in science and technology and maintain a strong manufacturing base under its upcoming Five-Year Plan. These policy directions signal the government’s intent to balance short-term economic challenges with long-term structural goals.
Overall, Asian markets ended the week on a positive note, supported by Japan’s political clarity and China’s steady but uneven recovery. Investors remain cautiously optimistic, with regional growth expected to hinge on policy support and improving global demand in the months ahead.
Looking Ahead
Overall, global markets closed the week on a positive note, supported by easing inflation, resilient economic data, and improving investor sentiment, though uncertainties around policy and growth continue to shape the road ahead.