Markets update: Markets end lower as rising bond yields draw investor attention

US equity markets closed the week lower, breaking a six-week streak of gains as rising bond yields drew investor attention, writes Ian Slattery.

Ian Slattery, Head of Investment Solutions (Zurich)

This increase in yields has been fuelled by stronger-than-expected economic and inflation data, shifting expectations around Fed policy. Additionally, the upcoming election has added to recent bond market volatility.

This week’s data showed the US Composite Purchasing Manager’s Index (PMI) rising to 54.3 in October from a reading of 54.0 in September. Manufacturing activity improved to 47.8 from 47.3, exceeding the expected 47.5. The services index came in at 55.3, slightly above last month’s 55.2 and the forecast of 55. October’s PMI’s indicated solid growth in business activity, marking a strong start to the fourth quarter.

In Europe, major equity indexes declined over the week. Business activity across the eurozone stayed in contractionary territory in October, with a preliminary reading of the composite PMI, which reflects both manufacturing and services activity, coming in at 49.7, up slightly from 49.6 in September.

PMI levels below 50 signal contraction. France and Germany, the region’s two largest economies, were the main contributors to the slowdown. Additional data this week showed consumer confidence in the Euro Area rising by 0.4 points to -12.5 in October 2024, reaching its highest level since February 2022, though still below its long-term average.

In the broader European Union, sentiment improved by 0.5 points to -11.2, marking a return to its long-term average for the first time since February 2022. Japan’s major equity indexes closed the week lower because of uncertainty surrounding the outcome of the general election on October 27th. The yen weakened, reaching the upper end of the JPY 151 range against the USD, compared to around 149.5 at the end of the prior week. The yen also faced downward pressure due to a strengthening dollar, as investors increasingly expect the Federal Reserve to ease rates less aggressively.

Equities

Global stocks were down last week finishing at -1.0% in euro terms and -1.3% in local terms. Year-to-date global markets are up by 20.7% in euro terms and by 18.4% in local terms. The US market, the largest in the world, finished down -0.7% in euro terms and -1.0% local terms.

Fixed Income & FX

The U.S. 10-year yield finished at 4.2% last week. The German equivalent finished at 2.3%. The Irish 10-year bond yield finished at 2.6%. The Euro/U.S. Dollar exchange rate finished at 1.08, whilst Euro/GBP finished at 0.83.

Commodities

Oil finished the week at $72 per barrel and is up 2.4% year-to-date in euro terms. Gold finished the week at $2,748 per troy ounce and is up 36.2% year-todate in euro terms. Copper finished the week at $9,469 per tonne.

The week ahead

Wednesday 30th October
Eurozone and US GDP is released.

Thursday 31st October
US PCE Price Index goes to print.

Friday 1st November
US non-farm payrolls are published.